Oral Answers to Questions

WORK AND PENSIONS

The Secretary of State was asked—

Unemployment

Brian Jenkins: If he will make a statement on the most recent unemployment rate in (a) Tamworth and (b) the UK.

Andrew Smith: Since 1997, the claimant unemployment rate in Tamworth has fallen by more than 40 per cent. In February, it stood at 2.9 per cent. That compares with the national rate of 3.1 per cent.
	Our policies are providing a stable economic environment that is helping more people to move into work. We are building on this by promoting flexibility with fairness in the labour market, so that it can adapt to changing circumstances and deliver high and sustainable employment for the future.

Brian Jenkins: Would my right hon. Friend like to congratulate organisations such as the Tamworth Programme Centre, which I shall visit on Wednesday? It works with Jobcentre Plus to get people back into employment. Does he agree that active labour market reforms have produced the record high employment that we have today, at a time of world recession? That runs counter to the idea that high unemployment kept the rate of inflation down and was therefore a price worth paying.

Andrew Smith: I join my hon. Friend in congratulating the centre in his constituency that is working in partnership with Jobcentre Plus. Partnership work such as that has, in Tamworth, cut long-term unemployment by 76 per cent. and long-term youth unemployment by 82 per cent. I am sure that the centre is looking forward to my hon. Friend's visit on Wednesday. Unemployment is never a price worth paying.

Intermediate Labour Markets

Wayne David: What steps he is taking to develop intermediate labour markets.

Nick Brown: Intermediate labour markets work with disadvantaged people and seek to provide a supportive work environment, helping them to develop the skills needed to retain employment. They are widely used in the United Kingdom, and some are funded by new deal providers and local authorities.
	The Department is investing £40 million in StepUp, a transitional work programme that will provide guaranteed jobs for up to 5,000 long-term unemployed people.

Wayne David: Does the Minister agree that the importance of intermediate labour markets was stressed by last year's report of the Select Committee on Work and Pensions? Will he give a commitment to mainstream such measures in the future work of his Department?

Nick Brown: I have visited a number of intermediate labour market programmes, including the StepUp pilots. I am impressed by the work that they do, and particularly impressed by the enthusiasm that they seem to be able to raise in local communities—including enthusiasm from local public representatives and local providers. I can give my hon. Friend the commitment that he asks for.

Archy Kirkwood: Does the Minister accept that intermediate labour markets are welcome because they help into productive work people who are a long way distant from the labour market? At the moment, the funding streams are very flexible and insufficiently co-ordinated. During work on its recent employment report, the Select Committee heard that some providers were struggling as they tried to make sense of 10 different funding streams. Will the Government do something to co-ordinate the funding so that it is more easily available?

Nick Brown: The hon. Gentleman chairs the Select Committee and its point was well made. In response, we are trying to find a way—within the Department and, indeed, across Government—of co-ordinating advice that is given to providers of not only intermediate labour market programmes but programmes more generally on which the Government rely. We are also trying to find a way of having an official to co-ordinate things and to work with lead providers to ensure that the range of provision is properly scoped and that providers have full information in front of them. However, the decisions will remain with the providers. An alternative approach, which is touched on in the Select Committee's report, would be to put the funding resources, or most of them, in one place. I think that that would mean that a whole range of programmes that are important to the Government would end up with less support. The right approach is to have better co-ordination, and we have made a start on that in the Department.

Jon Trickett: I welcome what the Minister has said. There are still parts of the country where long-term unemployment problems are deeply ingrained and where the private sector has yet to penetrate. Intermediate labour markets allow people to gain the confidence to get back into work. In my constituency, there are two very successful programmes—one in Havercroft and the other doing environmental work—but the funding streams are precarious. Will my right hon. Friend therefore encourage his Department to ensure that the funding streams are more robust in future?

Nick Brown: Where, largely for historical and geographical reasons, unemployment is high, intermediate labour markets have an important part to play. If my hon. Friend writes to me about the specific funding issues for the two intermediate labour markets that cover his constituency, I shall—without making any specific promise—see what I can do to help.

Mr. Speaker: I call Mr. Brazier.

Julian Brazier: I am sorry, Mr. Speaker, I was seeking to catch your eye not on this question but on Question 4.

Mr. Speaker: It seems that I do not always receive accurate information these days.

Anne McIntosh: Precisely what assistance is given to people who have difficulty in accessing the employment market because they have no transport of their own, and what assistance is there for people to travel to Jobcentre Plus? There is not even one Jobcentre Plus in the Vale of York.

Nick Brown: I understand what the hon. Lady says; indeed, she has raised the issue with me before. The question of how Jobcentre Plus can provide the new and exciting range of services to sparsely populated communities is an important one. A range of initiatives is under way, including subsidised transport arrangements, which will make a difference. Concentration on this issue in the Department, working with the Countryside Agency, is something that I take very seriously indeed—partly because of my former responsibilities. I acknowledge that, due to the rural nature of the hon. Lady's constituency, it is impossible to provide a Jobcentre Plus office physically within the boundaries of the Vale of York, so if there is an initiative that she thinks will help her constituency, I am more than willing to respond constructively to any specific representations she may wish to make.

Child Support Agency

Andrew Turner: If he will make a statement on the speed with which assessments are made by the Child Support Agency.

Alistair Carmichael: If he will make a statement on the Child Support Agency reforms.

Andrew Smith: In 2001–02, about half the cases took less than 20 weeks to reach full assessment, but one in six took more than a year.
	As the House is aware, the new scheme started on 3 March, and early indications are that both clients and staff are responding positively. By the end of the first year of operation of the new scheme, I expect the CSA to have arrangements for maintenance payment in place, on average, within six weeks from the first contact with the non-resident parent.

Andrew Turner: I thank the Secretary of State especially for that target. Is he aware that when his hon. Friend the Member for Normanton (Mr. O'Brien), whom I am delighted to see in the Chamber, asked him when he last met the chief executive of the CSA
	"to discuss progress on county court judgments, committal proceedings and the withdrawal of driving licences for non-payment of maintenance",
	the Under-Secretary of State for Work and Pensions, the hon. Member for Croydon, North (Malcolm Wicks), replied:
	"Ministers have regular meetings with the Chief Executive."—[Official Report, 30 January 2003; Vol. 398, c. 996W.]
	Technically, that could be described as a non-answer. Can the Secretary of State give some targets for the difficult cases where non-resident parents disappear, refuse to provide information and generally play havoc with the system?

Andrew Smith: We are in the process of setting demanding targets for the future operation of the CSA. The House will be aware that cash compliance is already up to 68 per cent. and that case compliance is up to 71 per cent. In the new system, we are setting targets of 78 per cent. for case compliance and of 75 per cent. for cash compliance. In place of the chaos and the huge backlogs that built up when the first scheme started, we have been making progress, and we are more ambitious for the future.

Alistair Carmichael: Figures from the Library indicate that the delay in introducing reforms to the CSA will cost lone parents about £90 million. What plans do the Government have to compensate lone parents for those losses?

Andrew Smith: Compensation would not be payable for the delay in introducing the new system, as the hon. Gentleman knows. It would have served lone parents and other recipients of maintenance badly if we had introduced the system when the IT was not ready. That would have risked repeating the chaos that occurred when the CSA first came into operation. It is good that we have got things right and that we set up the system only when the IT was capable of delivering an effective service. As much as anyone in the House, I look forward to the recipients of benefit also receiving, under the reforms that we have introduced, the child maintenance premium of up to £10 a week, which they have not received previously.

Bill O'Brien: I thank my right hon. Friend for his efforts to make the CSA more transparent, more fair and more accessible to people in need of child support. In addition to speeding up the claims, will he take into consideration the accuracy of the claims and reducing the amount of paperwork that parents with care and even absent parents receive from the CSA, as it is difficult to understand and follow? In making the issue transparent, will he take action to ensure that the assessments are clear and correct, and to try to reduce the amount of paperwork involved in making assessments?

Andrew Smith: Very much so, and I pay tribute to the long-standing and informed interest that my hon. Friend has taken in improving the CSA's performance. The new system is very much simpler; it cuts dramatically the amount of information that has to be collected and the number of calculations that have to be made. That should build confidence in its provisions among not only parents with care but non-resident parents as well. It is an opportunity to start a new era of much more effective child support and its payment, which is the critical thing.

Martin Smyth: I appreciate the opportunity to press the Minister and to welcome the improvements, but how long will it take to deal with the backlog of parents who have been wrongly assessed, as they have been told that that will not happen for some time until new applicants have been dealt with?

Andrew Smith: The introduction of the new system for new cases should make it much more straightforward and easier to get such things right first time. As the hon. Gentleman suggests, one of the great disadvantages of the old system was that it was so complicated, because of all the factors that had to be taken into account, that barely had the initial assessment been made before new information became available and the assessment had to be adjusted—in many cases to the point where neither the parent with care nor the non-resident parent ever really knew where they stood. That accounts for the extent to which the backlog has built up, and of course we will do everything that we can further to clear it.

Andrew Selous: Is the Secretary of State aware that, of the 384,000 parents with care entitled to receive child maintenance, 193,000 receive less than their entitlement and 79,000 receive nothing at all—that is £250 million in unpaid child support? May I suggest to the Secretary of State that he enable every Member to suggest three child support cases in his or her constituency in which the sanction that the Secretary of State has to remove driving licences could be applied to those non-resident parents who deliberately and consistently evade their responsibilities, many of whom enjoy much higher standards of living than the parents to whom the money should go?

Andrew Smith: First, I acknowledge the close interest that the hon. Gentleman takes in such things and his contribution to the Select Committee on Work and Pensions. It is perhaps unfortunate that we cannot allow a universal system to be dictated by whoever is top of an MP's list for action. We can use the sanctions that we have at our disposal, but the threat of those sanctions is more important. At the end of the day, what is important is not taking driving licences off people, but how many people pay because they fear that their driving licences would have been taken away. As I said, we have been improving both cash and case compliance, and our targets for the future are more ambitious, as I told the hon. Member for Isle of Wight (Mr. Turner). I will certainly do all that I can to ensure that sanctions are used where appropriate.

Pension Credit

Sydney Chapman: What the estimated impact has been on savings of the introduction of the pension credit.

Malcolm Wicks: When introduced in October, pension credit will for the first time reward, not penalise, savings, ensuring that those who have worked hard to save modest amounts will gain from having done so. The reward for saving will be up to £14.79 a week for single pensioners and up to £19.20 a week for couples. That is, of course, in addition to the guaranteed minimum income.

Sydney Chapman: That is all very well—[Interruption]—but does the Minister not realise that he is creating a massive means-tested scheme for the elderly, specifically against his party's promise in 1997 and the wishes of the Chancellor? He has also created a massive disincentive to save—those are not my words, but those of the president of the Faculty of Actuaries—and a hugely expensive bureaucracy. Does he not realise on reflection that there is a much less expensive and more effective way to help poorer pensioners?

Malcolm Wicks: With all due respect, I do not think that the hon. Gentleman has understood the scheme. Let us contrast it with what we inherited: pensioners with modest savings had them deducted, pound for pound, from income support, giving out entirely the wrong messages to those who had properly saved. The purpose of the pension credit is to recognise those modest savings and reward them accordingly. Given his interest in savings, I should have thought that he would have welcomed the pension credit.

Frank Field: As the Minister suggests that we recall the position that Labour inherited when it came to power, does he accept that since 1997 three quarters of all company pension schemes have either closed to new members or closed contributions to existing members, and that 11 per cent. of those schemes are now in the process of winding up? If we do not want all our constituents to end up on the pension credit, does not it behove the Government, once they have considered the response to their Green Paper, to introduce some very radical pension reform proposals?

Malcolm Wicks: As the right hon. Gentleman acknowledges, we have published our ideas in a Green Paper, on which we are consulting. I was at a consultancy meeting in the south-east of England this morning, at which we heard from a range of partners and stakeholders. We will introduce our proposals in due course. He is right that there is much insecurity out there, and we need to reassure people that when they save it is worth their while doing so. That is the purpose of the Green Paper and, at the risk of being relevant, it is the purpose of the pension credit.

Mr. Speaker: I call Mr. Brazier.

Hon. Members: Hear, Hear.

Julian Brazier: Does the Minister accept, none the less, that, according to Institute for Fiscal Studies figures, by October three fifths of all pensioners will be eligible for means-tested benefits, and by the middle of the century, with no change in policy, four fifths of pensioners will be so eligible? Does he accept that there is a connection with the halving of the savings ratio since the Government took office, and the fact that almost half of the youngest element of the work force now has no second pension provision?

Malcolm Wicks: As the hon. Gentleman is a good territorial, I knew that his time would come.
	Again, the hon. Gentleman is not giving fair acknowledgement to the fact that, with the pension credit, we are at long last trying to reward savings, which is an important element. There is a debate about means testing, but the pension credit involves a very simple incomes test, which ignores, for example, any income from savings below £6,000. That means that 85 per cent. of pensioners receiving the credit will have any income received from their savings ignored entirely. Furthermore, unless they have major changes in life circumstances, once people are receiving the credit they will not have to have their income assessed again for a period of five years. That means that, on average, those getting the pension credit will receive some £400 a year. I am particularly struck by the fact that some of the poorest pensioners, women, will benefit disproportionately, which is right and proper given their circumstances. In fact, 54 per cent. of those entitled to the credit will be single women. That is targeting that should be supported by the whole House.

James Purnell: Has my hon. Friend the Minister had a chance to read the Select Committee report on pensions, which says that nothing is inherently wrong with means-testing, as it reduces the high withdrawal rates—previously, about a third of pensioners lost all their occupational pension and now none does so—and recommends that we should increase the income disregard so that pensioners can do more work without having any of that clawed back by the pension credit?

Malcolm Wicks: I have read the Select Committee report. Having served under two distinguished Chairmen of that Select Committee, it is always the first thing that I read at night—[Interruption.] A bit of Lib-Labery there. We will consider the proposals most carefully. I emphasise, however, that we are determined to increase the take-up of pension credit. All those on the minimum income guarantee will be moved automatically to the pension credit. We will write to others and there will be a major television and press advertising campaign. I hope that all Members of the House, whatever their feelings about the overall policy, can join in in their constituencies to make sure that the poorest pensioners benefit from the pension credit. We all have a role to play.

James Arbuthnot: The Minister says that all those on the minimum income guarantee will be put automatically on to the pension credit. There are 670,000 pensioners on the minimum income guarantee who do not actually get it. Why does he think that it will be any different with the pension credit?

Malcolm Wicks: I want to be entirely fair about this, and take-up is always an issue. With all due respect, it was an issue for 18 years in an earlier part of our social and political history. The important point is that the poorest pensioners are more likely than others to take up income support or the minimum income guarantee. The proportion of the total amount available has a higher take-up rate than the number of claimants eligible for it, because the poorest tend to claim it most. However, I am not complacent. That is why I have outlined a range of proposals, including an advertising campaign and our writing to all other pensioners, to ensure that they know about the pension credit and will claim it.
	The hon. Gentleman has asked a perfectly proper question, but I repeat the point that we all have a significant role to play in our constituencies in ensuring that many of the most vulnerable and at risk claim the credit, which is worth a significant amount of money to them.

Pensions-related Benefit

Tom Brake: If he will make a statement on the level of pensions-related benefit take-up.

Maria Eagle: The numbers receiving the minimum income guarantee have risen steadily by 170,000 since 2000, which is encouraging. We shall continue to streamline the claiming process to encourage pensioners to take up their entitlement.
	As my hon. Friend the Under-Secretary has just said, we will write to all pensioners about the pension credit. I hope that, in a spirit of generosity, the hon. Gentleman will join us in our efforts by urging his constituents to claim what is rightfully theirs.

Tom Brake: I thank the Minister for her response. She will be aware that £1.5 billion of pensioner benefits are not currently claimed and that the increase in the take-up of the minimum income guarantee in 2000–01 was just 1 per cent. She will also be aware that the Government's target for pension credit is just 3 million out of 3.8 million pensioners. Does she agree with the Public Accounts Committee that the Government's target lacks ambition? If she does, what does she intend to do about that poverty of ambition? Why should Members believe that the measures that the Government will introduce this time to increase take-up will be any more effective than the measures that they have introduced in the past?

Maria Eagle: I gather from that succession of questions that the hon. Gentleman and his party are against the pension credit. In that sense, he must explain why he is in favour of taking an average of £400 off half of all pensioner households before the next election.
	We will make sure that we encourage all pensioners to claim their entitlement. We are doing more than any Government ever have by writing to each pensioner and by making it simpler to claim. Indeed, pension credit will be able to be claimed by making a simple telephone call. It would help us all if the Opposition parties, whatever their feelings about future pensions policy in this regard, stopped putting people off claiming the credit by saying that it is means-testing when it is not.

Stephen Hepburn: Is my hon. Friend aware that, in the two recent take-up campaigns in South Tyneside, almost 350 pensioners were identified as not receiving the proper entitlement? That represented a loss of income to the borough of hundreds of thousands of pounds. The success of the campaigns was put down purely and simply to home visits. Will my hon. Friend congratulate the campaigns on their success, which were supported by her Department, and devote more money to home visits so that we can make sure that pensioners get what they are entitled to?

Maria Eagle: My hon. Friend is right. In fact, almost 150,000 people have received an entitlement of approximately £20 a week extra as a result of our take-up campaign. That must be good.
	My hon. Friend is also right to say that home visits can make a difference. In that regard, the local service element of the Pension Service will be able to ensure that more vulnerable pensioners who otherwise might not take up the credit will have an opportunity to do so. We are putting more resources and efforts into the local service as we move forward to the better service for pensioners that the Pension Service will represent.

David Willetts: May I ask the Minister one specific question about these pension-related benefits? Will she assure Britain's 11 million pensioners that any changes to the main inflation index along the lines proposed by the Chancellor in his Budget last week will not affect the annual uprating of pensions and other benefits?

Maria Eagle: The hon. Gentleman will have to arrange for his Front-Bench colleagues to ask the Chancellor that question, because he knows very well that I am not in charge of making any such arrangements—the Chancellor is. He needs to ask his questions to the right Minister, as I am sure he knows.

David Willetts: This is a question about the uprating of pension-related benefits. It is a very important question, because the Chancellor proposes to change the index from the retail prices index to the harmonised index of consumer prices—HICP— which is apparently called "hiccup" for short. HICP tends to be lower than the RPI. If the Chancellor decides to change to that measure, he could cut the value of the uprating for millions of pensioners. Will the Minister give an assurance that the value of the uprating of pension-related benefits will not be reduced if the Chancellor changes his measure of inflation?

Maria Eagle: The Chancellor said that he was considering making such a change and, as he does so, he will no doubt examine carefully the impact that it might have on pensioners and upratings. The hon. Gentleman must make his representations to the Chancellor, but I can say that since this Government came into office, pensioner income has increased by 20 per cent. That is what I call a proper uprating.

Benefit Application Forms

Tom Cox: When benefit application forms were last revised to make them easier and simpler to complete.

Malcolm Wicks: The Department for Work and Pensions regularly updates its application packs to make them easier and simpler. As part of the Department's commitment to modernise our service, the introduction of telephone applications has proved particularly successful in simplifying and speeding up the application process. We are building on that success for those applying for the new pension credit.

Tom Cox: While I note that reply, I am sure that my hon. Friend will be aware of the National Audit Office report that was published toward the end of last year. It clearly said that vast sums of money are not being claimed year on year by retired people who are entitled to benefits. That clearly happens because forms are too complex and long. That point was made repeatedly at a meeting of the Wandsworth pensioners forum in my constituency last month. Whatever changes the Department has made, they are insufficient to encourage people to claim the benefits to which they are entitled. Will he look again at the forms and their complexity and length?

Malcolm Wicks: And we do. I pay tribute to our staff in the Department who, for example, have recently won a plain English award for their work on trying to simplify forms. We also work closely with citizens advice bureaux. Obviously, we understand that forms are daunting at first sight, which is why the new Pension Service and people's ability to use the telephone to apply for benefits are so important. We shall take on board the points that my hon. Friend makes. We have made a lot of progress on our forms, but there is more to do. He raises a very important point for pensioners.

Steve Webb: The Minister mentions the plain English award that the Department has won. I have in my hand a piece of paper from the Department. It is the standard letter sent to pensioners who apply for invalid care allowance, which begins:
	"We are pleased to tell you that we have looked at your claim and decided you are entitled to Invalid Care Allowance".
	The next sentence says:
	"However, we cannot pay the benefit to you".
	The letter continues:
	"You are entitled to £43.15 a week from"
	May, but the next sentence says:
	"We cannot pay you from"
	May.
	Does the Minister understand why pensioners in my constituency think that that is complete rubbish? Will he examine both that specific letter and the way in which pensioners are urged to apply for a benefit that they then cannot get?

Malcolm Wicks: We are still grappling—[Laughter.]—with the old computer systems that we inherited from the laughing Opposition. We have invested in computer systems and will get things right in future. The problem that the hon. Gentleman raises relates to the overlapping rule, but I take the point. He has a piece of paper in his hands and recent events suggest that his party is still associated with appeasement.

Bill Olner: I am happy that the Minister has held talks with the National Association of Citizens Advice Bureaux on the compilation of forms, but many local bureaux are overwhelmed by people seeking their assistance in filling them out. The Department should try much harder to simplify the forms so that people take up the benefits to which they are entitled.

Malcolm Wicks: Again, I understand the point, but let us consider what has happened in practice. The minimum income guarantee form has been reduced from 40 to only 10 pages, and people will be able to apply for pension credit by telephone when they can talk to another human being who will explain it to them. Obviously, the forms are often complex and we need to simplify them, but we are making great progress.

Tim Boswell: In general, the simpler the form, the better the take-up. The Department's figures show that the number of people claiming incapacity benefit and disability living allowance on the grounds of mental illness increased by a quarter and by three quarters respectively between 1997 and last year. Why should that be? Is it simply that the application forms for those benefits have been simplified—welcome though that is—and that take-up has increased as a result, or does the Minister think that there are more significant and potentially alarming factors to do with the state of mental health in Britain today? What practical policies do the Government have to assist those with mental health problems both to stay in work and to find work rather than becoming trapped in dependency on benefits?

Malcolm Wicks: Again, that is an important question. It is interesting that more people across the western world have claimed incapacity benefits not in the last six years alone, but since about 1979. It is also the case that in recent years the proportion claiming that benefit because of mental illness factors or stress has increased, and we need to understand that. We are emphasising the importance of joining up different agencies around the theme of rehabilitation, and a number of pilot studies on that will start soon. It is unacceptable to the individuals concerned—many of whom would like to work—that so many are on incapacity benefit. It is a big issue. The number of those on such benefits has increased roughly threefold since 1979. We all need to think hard about that and to take action, which is what we are doing.

New Deal (Leicester)

Keith Vaz: If he will make a statement about progress with the new deal in Leicester.

Nick Brown: The new deals are performing well in Leicester. Up to the end of last year, more than 4,000 people in the city had moved into work through new deals, including 1,200 in my hon. Friend's constituency.

Keith Vaz: Is my right hon. Friend aware of the success of a company called Business2Business, which provides ethnic minority projects under the new deal and has taken on 800 clients since it began? Does he agree that the best way to deliver the new deal to the ethnic minority communities is to ensure that organisations within the communities are used so that they can fully engage with their potential clients? Will he come to Leicester to see our success?

Nick Brown: My hon. Friend makes an important point in a powerful way. I am aware of the work carried out by the minority ethnic outreach providers. It is a relatively new initiative and is having an impact. The House might be interested to hear some examples of the work undertaken by the providers. They include holding surgeries in mosques to attract a wider range of people from minority ethnic communities and working in partnership with good employers, such as Sainsbury's, by having a stall within the shopping area to incorporate discussion of outreach services, but more needs to be done. I am happy to take up my hon. Friend's invitation to visit Leicester to see at first hand what is being done there and to discuss with the minority communities what more they believe we could and should do.

Retirement

Nick Palmer: If he will take steps to encourage optional later retirement.

Andrew Smith: Yes, our Green Paper sets out proposals to increase options for older people to stay in work longer, which include drawing a pension and working part-time, providing better increments for those who defer taking the state pension, legislating against age discrimination and building on the age positive campaign to raise awareness of the business benefits of older people staying in the work force.

Nick Palmer: We all realise that we need to encourage people to stay on after age 65 if they are able and willing to do so. For many people, however, the main issue is that they no longer want to work 100 per cent. of the time, and they would like to have a gradual, phased retirement. Does the Secretary of State agree that we need to introduce measures to encourage and facilitate that?

Andrew Smith: I very much agree, with one slight qualification. It is not for the Government to say that people ought to work longer. The key thing is that they have a choice that enables them to bring into correspondence their expectations of income in retirement and their other interests. Of course, whether they want to continue working also depends on how fit they feel. As part of that greater choice, people should be able to work part-time and draw down a pension. We make proposals for that in our Green Paper, in relation to both the tax treatment and the scheme design.

Oliver Heald: As the Secretary of State said, raising the age at which people cease to work was one of the proposals in the recent Green Paper. Has he seen the Institute of Directors response to that, which was released today? It describes the Government as
	"barely scratching the surface of the pension problem."
	Ruth Lea said:
	"There is no doubt about it, there is a pensions crisis in this country . . . people are not saving enough . . . the rates of return on pension saving have suffered, partly reflecting . . . the current Government's removal of the tax credit on dividend payments . . . We doubt if [the Government] recognise that there is indeed a pensions crisis."
	Will the Secretary of State now admit that it was the Chancellor's £5 billion a year smash-and-grab pensions tax raid that caused the crisis? Should not he now apologise to the millions of British people who will enter retirement as the victims of Labour's pensions crisis?

Andrew Smith: We could take more seriously the crocodile tears of the hon. Gentleman and those of his right hon. and hon. Friends who mouth this stuff if they came to the House with a commitment to reinstate the provision that they complain is being taken away. However, the hon. Member for Havant (Mr. Willetts) is on record as saying that the Conservatives are not making such a commitment.
	The hon. Member for North-East Hertfordshire (Mr. Heald) referred to the Institute of Directors representations. We shall carefully consider those and the other 800 or more responses to the Green Paper. I am sure that the way to approach this challenge is through the mix of proposals that we have set out, combining informed choice, flexibility in retirement, radical simplification of the pensions landscape and opportunities such as those that I have just described, which will allow people to choose to draw down a pension and work part-time. We also want to provide protection for scheme members who feel vulnerable at the moment because of the schemes that have closed. All that and more will be in our response to the Green Paper.

George Foulkes: I agree with my hon. Friend the Member for Broxtowe (Dr. Palmer) and the Secretary of State. Does my right hon. Friend agree that it would be helpful to have legislation on age discrimination? Has he considered the experience of B&Q, which has found that by employing older people it gets employees with greater experience and wisdom? Does not that also apply to the Government and the House of Commons?

Andrew Smith: The longer that my right hon. Friend can go on asking questions like that, the better. Like him, I commend firms such as B&Q and Asda, which have led the way not only in making the business case for employing older people but in showing that that has commercial and customer benefits. That extension of choice, together with a simpler occupational pensions system and greater security within that system, is the sensible way forward.

Employment

Gary Streeter: What steps he is taking to help jobseekers find work.

Nick Brown: We are taking a wide range of steps to help jobseekers to find work, including the roll-out of Jobcentre Plus, delivering a work-focused service to all; the new deals, which have got 750,000 people into work; employment zones and action teams, which are helping a further 90,000 people in disadvantaged areas, including 2,000 in Devon, to find jobs; the minimum wage and tax credits, which guarantee parents with one child £237 a week for full-time working; and new technology such Worktrain and job points, which provide information about jobs and training. Those policies have ensured that since the start of the recent global downturn, the number of people working in the UK has increased by 500,000.

Gary Streeter: I am grateful to the Minister for his comprehensive reply. I know that he is doing his best, but many employers in my constituency report a growing trend whereby young jobseekers arrive for a job interview but through their behaviour demonstrate that they are not remotely interested in taking that job, or perhaps any job. Does he think that we are down to a small but stubborn minority of young jobseekers who are happy to receive benefits from the rest of us but are not remotely interested in work? What does he propose to do about that?

Nick Brown: The hon. Gentleman may have answered his own question, but he must not talk down his constituency. South-West Devon has a high standard of living, with only 1.3 per cent. of adults in the constituency unemployed. [Interruption.] The hon. Gentleman barracks me, saying, "It says here," and it does say so here, but the here from where I got the facts is his website.

George Mudie: The Minister will be aware that one of the most vulnerable groups of jobseekers is lone parents, but the new deal for lone parents has already moved 175,000 lone parents from welfare into work, and for the first time more than 50 per cent. of lone parents are in work. Despite the Opposition's threats to the new deal, will he confirm that that fine scheme has funds to continue?

Nick Brown: I can confirm that. My hon. Friend is right to say that the Government have made progress in that respect. We are proud of the achievement, but more needs to be done, and we shall carry on until we have made work pay for lone parents and helped to bear down on poverty in lone parent households.

John Bercow: Further to the highly pertinent question posed by my hon. Friend the Member for South-West Devon (Mr. Streeter) and the Minister's somewhat neurotic reply, will the right hon. Gentleman now answer this simple and intelligible question: how many jobseekers have had their benefit docked or withdrawn after refusing three reasonable job offers?

Nick Brown: With all due respect to the hon. Gentleman, of whom we on this side of the House are very fond, I am not sure that he should accuse other Members of being neurotic. As for the answer to his question, he knows that the number is relatively small. He knows from our previous discussions that the action is intended to be a sanction of last resort, not a mainstream means of doing business.

Anne Begg: I am sure that my right hon. Friend accepts that lone parents have been encouraged into work not only by the new deal for lone parents, but by the working families tax credit. In the past week, it has come to my notice that some people who applied for working families tax credit two or three months ago have not had their claim considered. In the light of last week's hiccup in the transition to the new child tax credit, will he engage with Treasury Ministers to ensure that those who are waiting for their claim for working families tax credit or the new child tax credit to be processed do not fall to the back of the queue and that their claim will be dealt with quickly? Many of the lone parents involved are already in work and desperately need that money.

Nick Brown: Of course I will do what my hon. Friend asks, and ensure that officials in our Department take those issues up with Treasury officials. There are three things that we must not lose sight of. First, the success that the Government have been able to achieve in the labour market is due to the fact that a combination of tax credits and the minimum wage means that work pays. Secondly, the jobs are there and, thirdly, the Department's proactive approach to helping people through training, advice or even encouragement into those jobs is having a discernible impact on the labour market.

Pension Credit

Desmond Swayne: What estimate he has made of the number of pensioners who will be in receipt of means-tested benefits once the pension credit has been introduced.

Malcolm Wicks: About half of pensioners will be entitled to pension credit when it is introduced in October, and they stand to gain on average £400 a year. We want as many people as possible who are entitled to it to receive the pension credit. We outlined earlier this Session the measures that we are taking to improve take-up.

Desmond Swayne: The Minister might have answered the question, but perhaps he could explain what his colleague, the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle), meant when she said in response to Question 5 that the pension credit was not means-tested. What on earth can she have meant?

Malcolm Wicks: This is an income-tested scheme, but it excludes those with savings of less than £6,000—[Interruption.] We are grappling with problems, but the Opposition are prattling about them. I would rather be grappling than prattling. We are grappling with the issue, and want to increase take-up as much as possible. The system will benefit pensioners. Whereas the previous Administration—[Interruption.] I know that it is boring to talk about it, but I shall do so. Whereas the previous Administration penalised people who saved, we are rewarding them.

Bill Tynan: I congratulate my hon. Friend on behalf of pensioners in Hamilton, South, who welcome the minimum income guarantee and who will, I hope, benefit from the pension credit as well. However, will he join me in condemning those who continue to seek to carry on with the rhetoric of how we look at means-testing benefit instead of accepting the benefit and arguing strongly that pensioners have a right to receive it, and that right is not means-tested?

Malcolm Wicks: I thank my hon. Friend for a serious question about a serious issue that should be treated seriously by Members on both sides of the House. Pension credit is an important new weapon in our attack on pensioner poverty. I am pleased that in absolute terms pensioner poverty is now down by 60 per cent. under this Labour Government, and in relative terms the number of old people in poverty has declined by 400,000. Those are results, and we will get better results when we introduce the pension credit.

Final Salary Pension Schemes

Mark Simmonds: What measures he plans to take to address the problems surrounding the closure of final salary pension schemes.

Maria Eagle: Our Green Paper "Working and Saving for Retirement" sets out proposals to encourage employers to promote and persevere with pension schemes of all kinds, including defined benefit schemes. We value our voluntary system of pension saving because it has delivered good results. We must all play a part to ensure that it continues to deliver, including the financial services industry, the Government, employers, employees and their trade unions. For our part, we intend to simplify significantly the regulatory regime, which could save employers £150 million to £200 million a year in administrative costs.

Mark Simmonds: I thank the Minister for her answer. However, since the Chancellor's decision to abolish dividend tax credit, £5 billion a year has been removed from people's pension funds, which has exacerbated the situation and led to the winding-up of 63,955 pension schemes. Will the Minister acknowledge the impact of that pernicious policy and the role that that tax has played in the current pensions crisis?

Maria Eagle: No, Mr. Speaker. I wish that when Opposition Members referred to the so-called £5 billion tax rate they would mention the concomitant £3.5 billion cut in corporation tax that accompanied it. Of course, they never mention the fact that pensions continue to enjoy generous tax privileges worth £13 billion a year. As for the hon. Gentleman's claim about the number of closures of final salary schemes, the Pension Schemes Registry figures for 2002 showed that in that year 3 per cent. of schemes closed to new members. He must remember that final salary schemes are still the most widespread form of provision. There are 5.7 million members of private pension schemes, 4.6 million of whom are in defined benefit schemes. We have £750 billion invested in occupational pensions, and while it is right that hon. Members should consider issues relating to private pension provision—

Mr. Speaker: Order. I think that that will do the hon. Member for Boston and Skegness (Mr. Simmonds).

John Smith: I warmly welcome the comments of my hon. Friend the Minister on encouraging all employers to contribute to personal and other pension schemes, but is it not time that we started to consider placing a statutory obligation on all responsible employers to do just that?

Maria Eagle: The Government are not yet convinced that we should abandon the voluntary nature of our private pension provision. Neither, I notice, is the Select Committee on Work and Pensions, which published a report recently. Our voluntary scheme has given good results and we should be wary of throwing the baby out with the bath water. We need to make the voluntary provisions work better, but if that were not to succeed more compulsion would be the alternative. We all need to consider which is the best way to ensure more pension saving–—the voluntary scheme or moving to more compulsion. My right hon. Friend the Secretary of State has announced a pensions commission, which, among other things, will consider some of those issues.

Vincent Cable: Is the Minister aware that some employers are not merely closing their schemes, but defaulting on their obligations to existing members? Will she investigate in particular the recent scandal of Lufthansa, which has told 200 long-standing UK employees that they must expect a cut of a third in their pension entitlement, despite the fact that the company is highly profitable and well able to service it?

Maria Eagle: I will have a look at that. The hon. Gentleman refers to one example, and there are others. The Green Paper sets out ideas on better member protection and ensuring that when schemes wind up, whether solvent or insolvent, there is a proper distribution of the assets in relation to the scheme. The downside of such behaviour from certain employers is that it undermines the faith and belief of all potential savers in private pension schemes. We have to get the balance right; otherwise, we cannot expect our fellow citizens to put their hard-earned money into long-term products such as pensions.

Jobcentre Plus

Andrew Dismore: If he will make a statement on Jobcentre Plus services in north London.

Malcolm Wicks: Jobcentre Plus services in the north London district are provided through our network of social security offices and jobcentres. Those will be replaced with new, integrated Jobcentre Plus offices in 2005–06.
	Jobcentre Plus will continue to provide the same high level of service that has already helped over 1,300 people to move into work through the new deals in my hon. Friend's north London constituency.

Andrew Dismore: As my hon. Friend is aware, I am very concerned about the lack of consultation on some of those changes. Can he explain why jobcentre customers and clients have so far not been consulted on the changes when offices close? In future, will customers be consulted?

Malcolm Wicks: I understand the question. Indeed, we shall have the opportunity in the Adjournment debate at a late hour tonight to discuss that important subject further. We intend to provide jobcentre services in the resource centre in my hon. Friend's constituency, and a job point will also be located in a local library. People can also phone Jobseeker Direct, so his constituents will be able to make full use of the excellent Jobcentre Plus service.

Child Care

Caroline Flint: What progress is being made to provide child care for parents seeking work.

Maria Eagle: Since 1997, about 650,000 new child care places have been created, benefiting over 1.1 million children, which means that we are well on track to meeting our target of creating new places for over two million children by 2006. From this month, a child care partnership manager will be working in every Jobcentre Plus office to ensure that barriers to employment relating to child care are tackled and to encourage customers, where sensible, to consider a career in child care.

Caroline Flint: I thank my hon. Friend for that answer. She knows that I am fully aware of how much the Government have done to support families and, in particular, child care for parents in work and those seeking work. Will she consider the issue for lone parents, especially the need to settle their children in child care before they begin work as well as the necessary payments to cover that period? In addition, will she consider low-paid workers, in particular lone parents, who may find themselves out of work through no fault of their own? What measures can be taken to ensure that their children remain in settled child care before they embark again on a new job?

Maria Eagle: My hon. Friend is right that parents, particularly lone parents, when considering going to work need to feel that their children are safe and in an appropriate environment. My right hon. Friend the Chancellor of the Exchequer announced in his Budget last week the idea of taster weeks to allow lone parents to check out child care provision so that they are sure that it is appropriate for their child before taking it up and going to work.

Iraq and the Middle East

Tony Blair: With permission, Mr. Speaker, I shall make a statement on Iraq.
	I should emphasise at the outset that the conflict in Iraq is not yet over. There will be tough times ahead, and fighting as well as peace building still to do. However, less than four weeks from the commencement of the war, the regime of Saddam is gone, the bulk of Iraq is under coalition control and the vast majority of Iraqis are rejoicing at Saddam's departure. Whatever the problems following Saddam's collapse—and in the short term they are bound to be serious—let no one be in any doubt: Iraq is a better place without Saddam. This was indeed liberation, not conquest, and the Iraqi people, given a chance, are every bit as much in favour of freedom as people anywhere in the world.
	Our commitment now is clear. Just as we had a strategy for war, so we have a strategy for peace. Iraq will be better—better for the region, better for the world, better, above all, for the Iraqi people.
	British forces have performed in Iraq with extraordinary skill, professionalism and compassion. We can be deeply proud of them. We also send our warmest congratulations to the American forces who bore the brunt of the advance on Baghdad, and did so with remarkable military skill. As we mourn our own soldiers who have fallen in the line of duty, so we mourn theirs. Our thanks too to the Australian and Polish forces who helped, to the Spanish forces and to the over 40 or so countries that have given support.
	We grieve also for the loss of journalists and others killed in Iraq and for Iraqi civilians and many of those conscript Iraq troops forced into the front line. If the forecasts of mass carnage proved thankfully wrong, none the less, innocent people died along with the guilty, and it places upon us a special and profound responsibility for Iraq's future.
	Let me give an assessment of the current situation. The south of Iraq is now largely under British control. The west is secure, and in the major town of Al Qaim fighting is diminishing. In the north, Kurdish forces have retired from Kirkuk and Mosul, leaving US forces in control. US forces are in and around Tikrit. They are meeting some resistance. But in essence, all over Iraq, Saddam's forces have collapsed. Much of the remaining fighting, particularly in Baghdad, is being carried out by foreign irregular forces. In Baghdad itself, the Americans are in control of most of the city but not yet all of it.
	As is obvious, the problem now is the disorder following the regime's collapse. Some disorder, frankly, is inevitable. It will happen in any situation where a brutal police state that for 30 years has terrorised a population is suddenly destroyed. Some looting, too, is directed at specific regime targets, including hospitals that were dedicated for the use of the regime. But it is a serious situation and we need to work urgently to bring it under control.
	Basra shows that initial problems can be overcome. I am particularly proud of the role that British forces, ably led by Major General Robin Brims, have played in Basra.
	Iraqi technicians and managers are now making themselves known to British forces. Together we are restoring many key services. Most public health clinics are operational. UK forces have supplied oxygen to Al Basrah general hospital and are providing other medical support where they can. About 200 policemen have reported for work. Joint patrols started on 13 April. In surrounding towns, looting has either ceased or is declining, local patrols are being re-established and co-operation with city councils is going well.
	Baghdad is the principal problem, though again the main looting is in areas not controlled by the American forces. It is, it must be said, still a highly dangerous environment for US soldiers. However, around 2,000 police officers have reported for work, there are some joint patrols in being and the head of the civil police department, not to be confused with the special security forces, has ordered police to return to work.
	Some hospitals, where possible, are now being guarded and the first medical supplies are being flown in, but it is still very difficult. Staff are naturally still scared, water and electricity are a problem, but every effort is being made to improve the situation. As we speak, residents in some parts of Baghdad at least are now returning.
	On weapons of mass destruction, of 146 possible sites known to us, investigations have begun in seven but, in any event, we know that for six months before the return of UN inspectors, Saddam put in place a systematic campaign of concealment of weapons of mass destruction. Until we are able to interrogate the scientists and experts who worked on the programmes, and the UN has a list of some 5,000 names, progress is bound to be slow. A specialised team, however, is beginning work and we are in discussion with allies and the UN as to what the future role of the UN in such a process may be.
	Shortly, we shall begin formally the process of Iraq's reconstruction. We see three phases in this. In the first phase, the coalition and the Office of Reconstruction and Humanitarian Assistance will have responsibility under the Geneva and Hague conventions for ensuring that Iraq's immediate security and humanitarian needs are met. The second phase, beginning a few weeks after the end of the conflict, will see the establishment of a broad-based, fully representative Iraqi interim authority. Working with the UN Secretary-General, coalition military leaders and others will help the Iraqi people to identify which leaders might participate in that interim authority. Once established, the interim authority will progressively assume more of the functions of government. The third phase will then bring into being a fully representative Iraqi Government, once a new constitution has been approved, as a result of elections which we hope could occur around a year after the start of the interim authority.
	In each phase, the UN will, as President Bush and I have said, have a vital role. I will have bilateral meetings at the Athens European Council with Kofi Annan and others. I welcome Kofi Annan's decision to appoint a special adviser, and I am pleased that at this weekend's World Bank and International Monetary Fund spring meetings all countries agreed that the two institutions should start looking at needs in Iraq as soon as the security situation allows. But the essence of all that we do is, as we said at Hillsborough, to ensure that Iraq is run by and for the Iraqi people. Iraq is a nation with a creative people, potentially wealthy, with a dynamic and prosperous future ahead of it. They do not need to be run from the outside by the US, the UK or the UN, and they will not be.
	I also discussed the wider middle east peace process at Hillsborough with President Bush. He reiterated his commitment to the publication and implementation of the road map for peace.
	There will be intense diplomacy over the coming days and weeks. It will be important to rebuild international relationships that have been fragile in these past weeks, to reach out and show common cause with all who now want to put the past behind us and work together for a stable and prosperous Iraq and for a peaceful middle east. With good will, that can be done, and, for the coalition, I can say that that good will exists. I hope that it is reciprocated. In Europe, there have been divisions. Between parts of Europe and the US, there have been divisions. Indeed, in many countries, in many parties, there have been divisions, but at least there is now a clearer basis for future agreement. As the full horror of Saddam's regime has become better known, so I believe there is acceptance that it is good that Saddam is gone. As the Iraqi people taste the fruits but also the travails of freedom, so there is a common will to help them to prosperity and greater democracy. There is a huge desire across the world to see definitive progress on Israel and Palestine based on the two state solution, proposed so forcefully by President Bush last June. There is also, I hope, a recognition that a world split into rival poles of power can result in much discord but little advance for any new global order.
	I am more convinced than ever before that partnership, not rivalry, is the best basis for future European-American relations. And for all the difficult times over the past few months, I remain committed to the United Nations, committed to making it more effective, committed to the notion that we need its legitimacy for the international community to be worthy of the name. But the surest way to make it so is to unify the nations that lead it. That will be a challenge in the weeks ahead.
	So we are near the end of the conflict, but the challenge of the peace is now beginning. We took the decision that to leave Iraq in its brutalised state under Saddam was wrong. Now there is upon us a heavy responsibility to make the peace worth the war. We shall do so. We shall do so not in any spirit of elation—still less of triumphalism—but with a fixed and steady resolve that the cause was just, the victory right, and the future for us to make in a way that will stand the judgment of history.

Iain Duncan Smith: Our armed forces have fought one of the swiftest and most successful military campaigns in modern times, and they are now winning hearts and minds in Iraq in building public order and in keeping the peace. I should like, on the Opposition's behalf, to pay tribute today to their skill, professionalism and courage, and to keep in our prayers and thoughts both those who have lost their lives, and the families who now grieve.
	The fighting, as the Prime Minister said, is not yet over, but the world has been rid of an evil tyrant and an evil regime. The people of Iraq will at last have an opportunity to choose the Government whom they want, and to live, we hope, in peace and freedom. I should like also to congratulate the Prime Minister. He has carried, we certainly believe, a heavy burden in the past few weeks, but he will have been comforted throughout by the conviction that he was doing the right thing for Britain and for the rest of the world.
	I should like to ask the Prime Minister about four specific issues: public order in Iraq, the humanitarian crisis there, its future government, and the wider prospects for the middle east. But before I do so, perhaps he could answer a question about another specific and relatively urgent issue. I understand that there are reports that the wife of Ian Seymour, a Royal Marines commando who was killed in a helicopter crash in Kuwait during the conflict, has been told to pay back his salary for the rest of the month and to move out of the home. Does the Prime Minister agree that this is a poor way to treat a family who have sacrificed so much, and will he ensure that this decision is reversed, and that no other bereaved family is treated in such a way?
	On public order, the Prime Minister and the Foreign Secretary said this morning that when tyrants fall, looting always follows, and we have seen pictures, particularly in Baghdad, of the looting of hospitals and shops, and even of the museum. The Prime Minister talked about the actions that are being taken. Will he now guarantee that no troops—certainly no British troops—will be withdrawn until Iraq achieves an acceptable level of stability and security? Can he also tell us whether other coalition countries have been asked to contribute to policing in Iraq, and, if so, what their response has been?
	On the humanitarian crisis, can the Prime Minister confirm that only one hospital in Baghdad now remains open, and will he ensure, in line with what he said, that whatever drugs, medical equipment, doctors and nurses are needed will be flown in, if necessary, from our own field hospitals in Kuwait? The whole House will have been moved by the pictures of the plight and tragic case of Ali. Now that Medevac has confirmed that it can evacuate Ali to Kuwait, will the Prime Minister confirm that there will be no difficulty in the RAF's flying Ali or other, similar cases to Britain, if that is required medically?
	The Prime Minister will also be aware that a humanitarian crisis is still unfolding. When does he believe the electricity and water supplies will be restored, perhaps in full? When does he believe the aid agencies will have a secure enough environment to return to the work that they say they are pledged to do?
	As for the future of Iraq, the Prime Minister knows that oil revenues are essential to the country's reconstruction. Is he now pressing for the lifting of sanctions on all sales of oil? If so, when does he think that will happen? Does he agree that the welfare of Iraq's people should come before the repayment of state debts run up by Saddam's regime, and does he also agree that putting those state debts aside should be part of a new Marshall plan for Iraq?
	The Prime Minister spoke about the three phases of reconstruction, but he knows that there are two views on a United Nations resolution and the interim Iraqi authority. The first, which appears to have been held last week by his Secretary of State for International Development and some others, is that a UN resolution is needed to make that authority legitimate; the second is that such a resolution is not needed. I asked the Prime Minister last week, and I must ask him again, whether he shares the view of his International Development Secretary.
	Let me now ask about the wider prospects of the middle east. Does the Prime Minister accept that there is a danger that the coalition will give out mixed messages, particularly with regard to Syria? We understand that the Prime Minister has spoken to President Assad, and that he has sent a Minister to speak to the regime directly. Meanwhile, the American Government have said:
	"There's got to be a change in Syria . . . The Syrians need to know they'll be held to account."
	Is the Prime Minister's view the same as the Administration's in Washington?
	In regard to the middle east peace process, we welcome the moves by the new Palestinian Prime Minister, Abu Mazan, to establish his Cabinet, and also Prime Minister Sharon's reported concessions on the settlements. There are, however, reports that Yasser Arafat has very recently refused to accept some of the Cabinet candidates proposed by Abu Mazan. Does the Prime Minister see that as a retrograde step, and does he believe that it will delay the publication of the road map that is so needed to help stability in the region?
	The war may be drawing successfully to a close, but a challenge at least as big now faces us—the reconstruction of Iraq and its restoration as a nation that believes in justice, the rule of law and the freedoms and rights of its own people. I assure the House that Conservative Members will be as resolute in seeing this through as we were in the prosecution of the war.

Tony Blair: I thank the right hon. Gentleman for his kind words, and for his support over the past few weeks. Let me say to him personally that there must have been times over those weeks when the issue presented, let us say, a tempting target for any Opposition, and it is to his credit that he remained steadfast in his support of the action.
	Let me try to deal with the right hon. Gentleman's points in the order in which he raised them. I understand from the Secretary of State for Defence that the facts about Mrs. Seymour are not correct, but I assure the right hon. Gentleman that because if they were correct they would be wholly contrary to normal practice, we will make sure that whatever needs to be done there is done.
	Of course the British forces will stay until there is proper security in the country, although obviously we hope to ensure that some of the policing is done by local people as soon as possible. That is why it is encouraging that joint patrols are already taking place. Although people may find this strange, much of the problem for Iraqi citizens came from the special security forces, not the ordinary civil police, if I may put it like that. Many of those people could perform an adequate and good task for the future of Iraq. Other countries are already offering help in relation to policing and security.
	As we speak we cannot be sure of the exact situation relating to each of the hospitals in Baghdad. What I do know is that the American forces are trying to take special responsibility for protecting the hospitals and getting medical supplies in, and they will do their very best to ensure that that is done. It is difficult, because certain parts of Baghdad are not yet safe. It is worth bearing in mind the fact that both our soldiers and some of the American soldiers have been put at great risk when they have wanted to get on with the ordinary, normal business of protecting the population, but have found that the environment is not yet permissive enough for them to do so. We are well aware that that is a priority for us to tackle.
	In relation to the evacuation of Ali Abbas or anyone else, we are in touch with the authorities in cases, such as his, which are not in the zone under our control. We will do whatever we can to help him and others in a similar situation. Within the past 24 hours, two Iraqi children have been flown out to the UK for medical treatment, but they were both from inside our area of control. We are working with the US forces to do what we can for Ali and others.
	On electricity and water, one of the problems is that power has been sabotaged as the Iraqi special security forces have left particular areas. We are trying to repair it and we are working with the International Red Cross and Red Crescent Movement to do so as quickly as possible. In some parts of Basra, water and electricity have never been fully available to all the local population, but it is important to secure as great an availability as possible. I think that I am right in saying that the pipeline from Kuwait to Umm Qasr has already provided some 4 million litres of water. We are trying to repair the infrastructure there as quickly as possible—or to improve it, since it was often in an extremely bad state in the first place.
	We obviously want to see sanctions lifted as quickly as possible, which will allow the Iraqi interim authority, once it is established, to operate far more freely. We should make as speedy progress as we can on that. The debts of countries were discussed at the International Monetary Fund and World Bank meetings at the weekend and are being looked at by the Paris Club. I hope that people are generous in recognising Iraq's needs for the future.
	In respect of the Iraqi interim authority and the UN, the issues have been somewhat superseded by the fact that we have agreed a process through which we will work with the UN Secretary-General to try to ensure that the right names and people come forward. In the south of the country we have already started the idea of a joint commission to get the right people to come forward—similar to what happened in Afghanistan—but in the end it will have to be endorsed by the United Nations. That was agreed several weeks ago and remains the case. I believe that, with good will, the problem can be well managed. In a sense, the IMF and World Bank meetings at the weekend went better than they might have gone, which is important.
	In relation to Syria, the issue concerns any attempt by Syria to harbour people who are leading members of the Iraqi regime. When the US or anyone else talks about holding them to account, they mean in respect of that matter. I spoke to President Bashar Assad over the weekend, and he assured me that they would interdict anyone crossing the border from Iraq into Syria. I believe that they are doing that. The Foreign Office Minister will be present in Damascus to have further talks on the issue. Some of the wilder surmises in the media at the moment are simply not correct: there are no plans whatever to invade Syria.
	As for the Palestinian Prime Minister and his Cabinet, it is important to recognise that he has to be satisfied that he has the right Cabinet in place. I have read reports, but cannot verify them, about some disagreement between him and Chairman Arafat. I hope that that is not the case. The sooner that Cabinet can be put in place, the sooner the road map can be published and we can get started on a matter of vital importance. It may be that the liberation of Iraq provides a new context in the middle east, as well as Iraq itself, in which we can make progress on a lasting middle east peace process. I certainly hope so, and the sooner the Palestinian Cabinet is in place, the better.

Charles Kennedy: In thanking the Prime Minister for his statement, we all endorse the genuinely felt sentiment about the skill and courage of the British forces who have undertaken their task and achieved an outstanding and remarkable victory.
	Will the Prime Minister take this opportunity to confirm that it is crucial that the international community be involved in the rebuilding of Iraq, as regards both its infrastructure and its civic society? Does he agree that building consensus on the future of Iraq requires the securing of that degree of international support?
	Stability in Iraq and the whole region must rest on the principle of legitimacy. Does the Prime Minister acknowledge, therefore, that the more the United Nations is involved in the process towards legitimacy, the more the post-war settlement will appear to be, and will be, stable?
	The Prime Minister referred a moment ago to the UN, saying that he favours independent verification of weapons of mass destruction. Will he be a little more clear on that? Does he want the readmission of the weapons inspectorate under the auspices of the UN during the transition period? Does he favour that, and are the Government arguing for it?
	The Prime Minister also spoke about Syria. A few days ago he said, and I use his words, that Syria should make a decisive break with its previous policies. To which policies was he referring? Were those policies in place when the President of Syria met Her Majesty the Queen officially not long ago? On the radio this morning, the Foreign Secretary said that he was unsure whether Syria had been developing chemical or biological weapons. He said that questions needed to be answered. What exactly will those questions be in the course of this weekend's discussions with the President of Syria?
	A meeting will take place tomorrow between Iraqi opposition groups and coalition representatives. What more can the Prime Minister say about that? Will the UN be present, and will it participate in those discussions? Does the fact that those discussions are taking place mean that the earlier British idea for a UN-sponsored conference is off the agenda?
	Does the Prime Minister agree that any policy for the rebuilding of Iraq must go hand in hand with a policy to rebuild our international institutions and the international order? We will never achieve one without the other.

Tony Blair: In relation to United Nations involvement, we have the right framework within which that can happen. There should be a vital role for the UN at every stage, but we should not get into a competition between the coalition and the UN. If we approach the process in the right spirit—one of working together—we will find our way through. The fact that Kofi Annan has appointed a special adviser is a good omen in that regard.
	That also applies in relation to any questions to do with weapons inspectors from the UN. That is a matter for discussion, and we should carry on those discussions in a reasonably calm way. There is no doubt that we will want some sort of objective assessment in respect of any finds that we make; that is in our interests as well as everyone else's.
	On what was said about Syria and the break with previous policies, support for terrorism—terrorism that deeply, adversely affects the middle east peace process—should stop, and it should stop irrespective of what has happened in relation to Iraq. We have continually made that clear to Syria. On chemical weapons, people are simply pointing out that Syria is not a signatory to the chemical weapons convention. If Syria does have chemical weapons in its possession, it should be a signatory.
	In relation to the coalition and Iraqi opposition groups, I hope that some of the conspiracy theories about people simply being parachuted in to take over the country can be laid to rest. What is important is that, in the end, the legitimacy of anyone—from inside or outside Iraq—will rest on their support from the Iraqi people themselves. The conference on Iraq that the Foreign Secretary has proposed is, I think, still possible. Some such event will be necessary, once we are further down the line, to ensure that we can bring the Iraqi interim authority into being. I have no doubt that the United Nations will have a vital role in that.
	On international order, there is a lot of rebuilding. However, in the end, that will depend on the international order being formed around an international consensus about what it should contain. That is why it is important that the leading nations of the United Nations—especially those with permanent status on the Security Council—should come together through a common agenda. I repeat what I said in my statement: I do not believe that that will happen if people view the United States as one pole of power with some other pole of power set in opposition to it. That would be a disaster for the world. We should we work in strategic partnership with each other. That can be achieved, but it will require changes all round.

David Cairns: Will my right hon. Friend clarifiy the answer that he gave to the Leader of the Opposition? My right hon. Friend has repeatedly, and rightly, said that this was a conflict not with the Iraqi people but with the regime. None the less, there were inevitable deaths and casualties. Should it prove necessary and possible to evacuate some individuals—in particular, injured children—to this country to receive the best possible medical treatment, will my right hon. Friend give an assurance that the ordinary processes of visa entry clearance and so on will not form any barrier to children receiving the speediest possible medical assistance?

Tony Blair: I can give my hon. Friend that assurance. The Home Secretary has made provision for those ordinary processes to be set aside in respect of anyone who is evacuated.

Brian Mawhinney: Will the right hon. Gentleman accept that I, too, commend the leadership that he has shown in recent weeks in partnership with President Bush, and, indeed, the leadership and support that has been offered by my right hon. Friend the Leader of the Opposition? Does the right hon. Gentleman still believe that Iraq has weapons of mass destruction?

Tony Blair: Yes, we do. There is no doubt at all that, over the years, Iraq has possessed those weapons. We are being asked to believe that, having in effect pushed the inspectors out in December 1998, the regime voluntarily gave the weapons up. I have always thought that incredible.
	It was inevitable, after the campaign of concealment, that we would go in and that human intelligence—through experts and scientists speaking about the programmes and knowing that they could do so safely—would guide us to the weapons, which I have absolutely no doubt exist.

Jim Knight: As the Prime Minister has said, our armed forces are carrying out their work with great skill. They still have a variety of military tasks to perform, such as the fighting of residual elements, the distribution of humanitarian aid and some difficult policing. What plans does the Prime Minister have for our forces—especially our reservists—to come home where work on their tasks is no longer required? Given that Tornado pilots will no longer need to police the no-fly zones, do we continue to need basing in Saudi Arabia?

Tony Blair: The Secretary of State for Defence informs me that some things are beginning to happen already with the reservists; basing is a matter that is under discussion.
	My hon. Friend made an important point at the outset. The Chief of the Defence Staff—whom I thank for all his hard work and commitment over these past weeks, along with others at senior levels of our armed forces—has just come back from a visit to the region. He describes in graphic detail how our forces are still often involved, in the same area, in fighting at one end and policing at the other. It is important to acknowledge that, although the regime has in effect collapsed, there are still sporadic outbursts of fighting and our troops still face significant danger.

Robert Jackson: All around the world, there is great concern about the looting of museums of Iraq and the threat to very important Iraqi antiquities, many of which were excavated by British archaeologists. Will the Prime Minister give an assurance that the future of those sites and museums will be a high priority for coalition forces?

Tony Blair: We certainly will make it a priority. At the moment, we are trying to secure the sites and to investigate how much material was taken from the national museum. At present, we cannot be exactly sure about that. We are taking steps—I think there will be a conference this Thursday, which the director of the British Museum will attend—to see what we can do. We shall also make provision to ensure that no stolen works of art can come on to the market. We will do everything that we possibly can; we understand that it is a serious responsibility for us.

Donald Anderson: Surely the whole House will rejoice at the fall of an evil regime and at the fact that the worst predictions—about refugee flows, the oil wells, massive civilian casualties, regional fragmentation and so on—have been confounded. Does my right hon. Friend agree that there is now a unique opportunity to make progress in the middle east? As the pressure on Israel has been lessened, surely the Palestinians can, if they want, prevent the suicide bombers. How can there be a viable Palestinian state if the territory is criss-crossed with roads leading to the various settlements?

Tony Blair: My right hon. Friend is exactly right. There is now a great chance for peace and stability in the middle east. It obviously depends in part on Iraq making the transition that we want to see. It depends, as my right hon. Friend rightly says, on us making progress in the middle east peace process. I hope that Prime Minister Sharon's interview today indicates that he is aware of Israel's responsibilities in that regard. My right hon. Friend is absolutely right to point out that we have to deal with those who would try to upset any peace process by terrorism. That means not just the individual people carrying out terrorist acts, but also the states, groups or people who support terrorists in that work. Every terrorist activity undermines the prospect of the peace process working.

John Stanley: Does the Prime Minister agree that, while the continuing danger to our forces on the ground most certainly must be recognised and given the highest priority, it is of fundamental importance in this sensitive period of transition to peace that the firing self-discipline of all coalition forces continues to be maintained?

Tony Blair: I agree with that entirely.

Tam Dalyell: The Prime Minister said that there were "no plans", as he put it, to invade Syria or to take action against Syria, but does not he know that there are people in Washington with an agenda—James Wolsey in particular—who go on and on about the need for regime change in other countries of the middle east? Do we have the unambiguous assurance that the British Government will not in any circumstances support military action against Syria?

Tony Blair: I said that there are no plans whatever to invade Syria. All sorts of things may come out of the newspapers about various conspiracy theories to do with parts of the American Administration, but I have the advantage of talking regularly to the American President and I can assure my hon. Friend that there are no plans to invade Syria. What people are saying, however, is that it is important that Syria does not harbour people from Saddam's regime or allow any transfer of material from Iraq to Syria. I have spoken to President Assad and he has assured me that that is not happening. I have told him that it is important that he makes sure that that assurance is valid.

Peter Luff: Does the Prime Minister agree that one of the unfortunate consequences of the conflict in Iraq has been that, while the eyes of the world are understandably concentrating on Iraq, other evil tyrannies and despots are taking advantage of that to increase the oppression of their people? Will the Prime Minister show the same qualities of political courage and resolve that he has shown in the conduct of the military campaign in Iraq in a diplomatic campaign to deal with such evils? I am thinking especially of Robert Mugabe in Zimbabwe, where the British Government have not shown sufficient determination.

Tony Blair: We must make sure that we take every action that we can in respect of what is happening in Zimbabwe, which is a terrible and appalling situation. It is something that we discuss regularly not only with our American allies but with others in Europe. There must also be concerted action by countries in the region.

Jeffrey M Donaldson: The Prime Minister will be aware of the valiant role of service personnel from Northern Ireland, including those in the Royal Irish Regiment and the Irish Guards. We now have a problem in policing the new situation. Will the Prime Minister consider drawing on the expertise of officers who served in the Royal Ulster Constabulary for 30 years and who took premature retirement?

Tony Blair: May I, first, join in congratulating the Royal Irish Regiment and the Irish Guards on performing quite superbly in Iraq? We should look at using retired RUC officers. Indeed, the Defence Secretary tells me that representatives of our UK police have gone out to Iraq to see what assistance we can give. Obviously, former members of the RUC, for very obvious reasons, have particular expertise.

Jim Cunningham: How convinced is my right hon. Friend that the Americans will take an even-handed approach to the Palestinians and to the Israelis in getting a middle east settlement? I am sure that he knows that there is deep suspicion in Muslim communities that those approaches are not very often even-handed.

Tony Blair: My hon. Friend is right; there is a lot of scepticism—indeed, cynicism—in certain quarters about whether the words that we have spoken recently in relation to the middle east peace process are meant and are genuine. I believe that what President Bush has said he means, and it is worth pointing out that the road map is important in part because it was drawn up by the US, but also by the EU, Russia and the UN. That is an indication of it being even-handed. The point about the middle east peace process now is that we have an objective that is agreed by everybody—President Bush was the first American President to articulate it—and it is a two-state solution, based on Israel confident of its security and a viable Palestinian state. That gives us a sound basis for hope in the future.

Edward Garnier: There is obviously a pressing public relations need to have coalition troops patrolling the streets of Iraq's towns and cities as quasi-policemen, maintaining law and order, but will the Prime Minister assure the House that nothing will be done unnecessarily to damage the security of our troops, given that Iraq is still a very dangerous place?

Tony Blair: Yes, and that is a very valuable point, and it is why the judgment must be left to the commanders on the ground. Where they can and do judge that it is safe for soldiers to patrol in berets and so on and move to a different method of patrol—almost a policing method—they do so, but that has to be their decision, and it would be wrong to put the security of our troops at risk in any way. I simply say that, in the aftermath of the collapse of the regime, it is inevitable that there will be a certain amount of disorder and problems, but it is interesting that in some of those cities, not least Basra, where a week ago those problems were very serious, they are at least now looking a lot better. There is still a distance to go, but they are looking better.

Anne Campbell: If it is found or strongly suspected that members of Saddam's regime are taking shelter in Syria, or that Syria is hiding weapons of mass destruction, what action would my right hon. Friend take to persuade Syria to give them up?

Tony Blair: We have said that Syria should hand any people from the regime who may take refuge in Syria to the coalition forces. I have to say in fairness that the President of Syria has said that he does not believe that there are any such people in Syria. In relation to chemical weapons, I have nothing to add to what I said earlier, but there are conventions governing these things to which countries who have such weapons should be signatories.

Ian Taylor: The excellent military campaign that has got rid of Saddam Hussein's regime is, obviously, to be welcomed, but will the Prime Minister clarify something that he said in his statement? He said that the war was about ending the brutalised state under Saddam Hussein. Was that actually the war objective?

Tony Blair: No. The objective is to make sure that Iraq is effectively disarmed of weapons of mass destruction, but while Saddam's regime refused to co-operate fully with the UN inspectors and refused to give up those weapons, its removal became an objective of ours, so things proceeded in that way. I think that I have said before, and I will say again, that although the reasons for our action and its legitimacy had to be contained within the issue of weapons of mass destruction, the appalling nature of the regime is a reason why we did take and should have taken that action with a strong heart and a good conscience.

Alice Mahon: May I put it to the Prime Minister that the whole world saw the priorities of the United States when it guarded the oil ministry but stood by while other ministries were trashed by looters, and while the national museum and three or four hospitals were trashed? Many of us who opposed the war did not believe that the reason for it was to get rid of the elusive weapons of mass destruction, and are even more convinced that the United States and the United Kingdom invaded Iraq to get at the oil.

Tony Blair: I have learned that nothing that I can say will eliminate people's conspiracy theories. The UK is a net exporter of oil, so we have no need of the Iraqi oil. Secondly, we and the US have made it clear that any oil revenues will go to the Iraqi people. Some indication of our good intent was surely shown in the renewal of the United Nations oil-for-food programme.
	In relation to ministries in Baghdad, it is important to realise that the soldiers were going into a situation in which there were up to several thousands of snipers and people fighting in the streets, who were not necessarily armed with heavy weaponry but who intended to kill as many American soldiers as possible, and they could not provide immediate security cover to all the parts of Baghdad that they would have liked to have covered. It is important to have a sense of awareness of the dangers that American forces still face in those areas. It is not an easy environment in which to exist, but I know that they will do their level best to protect hospitals and sites of interest as soon as they can do so.
	I simply say to my hon. Friend that I have had discussions on this matter for months and months, before the conflict began, and, clearly, I have intensive discussions on a daily basis. Not a single discussion that I have had with the American President has been about our desire, need or intention to get our hands on Iraqi oil.

Alex Salmond: The Prime Minister says that there are no plans whatever to invade Syria, but Mr. Wolfowitz is quoted as saying that Syria is a problem that needs to be dealt with. At the third time of asking, can the Prime Minister give the only commitment that he can give under these circumstances: United Kingdom forces will not participate in an attack against Syria?

Tony Blair: There are no plans to invade Syria, so it stands to reason that we do not intend to invade Syria. When one looks at the statements that are supposed to come out of various parts of the Administration and one analyses their context, one finds that the context is the concern, which is why I spoke to the President of Syria: it is that Syria may be acting in a way, first, to support Iraqi forces, and, most latterly, to give refuge to members of the Iraqi regime. That is the problem with which we are trying to deal. It is being dealt with by my conversations with the President, and by the Americans and us making it clear what is acceptable or unacceptable. I suspect that this is another conspiracy theory that in time will fade away, but I have no doubt that it will be replaced swiftly by a fresh one.

Andrew MacKinlay: When the Prime Minister meets Kofi Annan and other members of the permanent five, will he raise the need for Security Council resolutions to include some method of compliance rather than the issue being left in a vacuous state? Will he also address the question of Iranian exiles in Iraq? Can we be assured that they will not experience what the Cossacks experienced in 1945, when, as victims of war, they were pushed over to the Soviet side and were dealt with severely? People who are in Iraq in exile from Iran should be regarded sympathetically.

Tony Blair: First, I agree with my hon. Friend that it is obviously important that any resolutions lead to action. Secondly, we will do our level best to protect any people in the circumstances that he describes.

Nick Gibb: Yesterday, The Sunday Telegraph referred to Iraqi papers that show the Russian Government in an unfavourable light and, indeed, that they assisted the Iraqis. The article implies that The Sunday Telegraph journalist discovered the documents. Is that correct, in which case should not the sources be better secured on the ground? If it is incorrect and the story is based on Government briefing, would not the best course be simply to tell the public just that?

Tony Blair: There are all sorts of documents in circulation at the moment. I really have absolutely no knowledge of the truth of these documents. Although I can think of less secure vehicles for protection and security than The Sunday Telegraph, I will not enter into that point. We are trying now—this is important—to make sure that we conserve as many of those documents because they will be interesting not least for the issue of weapons of mass destruction, but perhaps for many other issues, too.

Geraint Davies: Does my right hon. Friend agree that now is the time to remember the dead and injured, to push forward with humanitarian aid and law and order, but to join the Iraqi people in rejoicing and celebrating in the liberation of Baghdad, Basra and the rest of Iraq and to build a new Iraq that is founded on peace and reconciliation and run by the people of Iraq for the people of Iraq? Such peace and reconciliation should be underlined by a system in which Saddam's henchmen are brought to book not in Guantanamo bay but under the auspices of the United Nations.

Tony Blair: I agree with my hon. Friend. I should say that about 30 countries are already pledging significant humanitarian aid.

Nicholas Soames: I join the Prime Minister and my right hon. Friend the Leader of the Opposition in recognising the gallantry, determination and, above all, humanity of British forces in Iraq and, especially at this time, the patience and fortitude of their families. I agree entirely with the Prime Minister about the need to gain total control of the security situation before waging the war for peace on a huge scale, but will he nevertheless take seriously the point made by the hon. Member for Lagan Valley (Mr. Donaldson) about the use of British police? Substantial numbers of relatively young men and women leave the police force and they would be ideally suited to going to Iraq to assist in the maintenance of good order. Will the Prime Minister see how he can push that forward?

Tony Blair: I certainly will. It is a priority for us, because the better we can maintain order, the better it is for the people of Iraq and the less is the pressure on our soldiers.

Angela Eagle: Everyone rejoices at the fall of a brutal dictatorship, but will my right hon. Friend share with the House his thinking about how any subsequent war crimes tribunal may be able to bring to justice the perpetrators of the very many human rights abuses that happened in Iraq over the years of the Saddam dictatorship?

Tony Blair: Again, that is a pertinent issue. We are discussing it with our allies and with the United Nations. It is important that any such tribunal would have legitimacy and would obviously be based in Iraq.

Richard Allan: Further to the Prime Minister's earlier response about the objects sadly being looted from Iraq's museums and archaeological sites, can he give the House a firm assurance that any cultural objects that turn up in the United Kingdom having been looted from Iraq will be returned to museums in that country and not sold into private collections, so making it clear to any potential looters that there is no market for such material?

Tony Blair: Yes.

Tony Lloyd: The Prime Minister deserves the support of the whole House in the tone that he has set on the need to build co-operation and on a new spirit with the other permanent members of the Security Council—France, Russia and China. If we are to get back to the tasks of the war on terrorism and the building of the middle east peace process, that co-operation will be important much further afield. In passing, I point to Kashmir as one issue that needs attention.
	In that context, does my right hon. Friend recognise that the loud and strident voices in Washington on the question of Syria lead precisely to the suspicions that have been raised in the House today? Will he pass on to Washington the words of Javier Solana that perhaps now is the time for a rather quieter period from Washington?

Tony Blair: To be fair, often people give the answers when they are asked the questions and that is one of the things that happens when there are constant debates and discussions. I think that the concerns that people have expressed about Syria are very clear and policy has not changed at all in relation to that. There has been a particular concern because of reports that senior regime figures were taking refuge in Syria. However, the worries about Syria's support for terrorist activity in connection with the Israel-Palestine issue are well known and have been there for a long time. I can only repeat what I said earlier. When my hon. Friend reads the context in which the remarks were made, he will find them a lot less alarming.
	Kashmir is another issue and I hope that, with India and Pakistan, we can make progress on getting the resolution of a dispute that must obviously be resolved by those two countries. We will give any help and support that we can to ensure that the dispute has a better chance of diminishing as an item of conflict between the two countries, but that is a topic for another day.

Patrick Cormack: Will the Prime Minister, whose leadership has been so well and properly recognised by my right hon. Friend the Leader of the Opposition, give some thought to a suggestion that I put to the Foreign Secretary the other day? During this difficult transitional period, will he consider appointing a member of his Government as a resident Minister in Iraq?

Tony Blair: I will certainly give that serious consideration.

David Winnick: In view of one or two comments that have been made today, is my right hon. Friend aware that there is no need to apologise in any way for the fact that one of the most murderous and brutal tyrannies has been destroyed? That, in itself, is a victory for not only the people of Iraq, but humanity as a whole. Is my right hon. Friend sufficiently confident that the United States will put enough pressure on the fundamentalists in Israel—both military and political—who will use any device or trick to stop a sovereign Palestinian state coming into being?

Tony Blair: First, I thank my hon. Friend for his support during the past few weeks; it has been remarkable and strong throughout. I hope that we recognise that fundamentalism on either side of the dispute in the middle east will not help. We have the basis of a settlement: the two-state solution. A process is set out in the road map to get us there, and I hope that we seize the opportunity that is offered of a new start in the middle east to make that progress.

Boris Johnson: Given that Iraq is now free, thanks to the heroic efforts of the coalition forces, does the Prime Minister think that any of the tens of thousands of members of Saddam Hussein's Ba'ath party could have a legitimate claim to asylum in this country?

Tony Blair: I know of no applications that have been received and I doubt that any would be welcome.

Ronnie Campbell: Will the Prime Minister confirm or deny that the coalition has a plan to sell off nationalised Iraqi oil to the highest bidder?

Tony Blair: I do not know of that plan. The plan that we have is to ensure that the Iraqi interim authority takes control of the oil wealth of Iraq as soon as possible. The great thing is that as the new interim authority comes into being, sanctions can be lifted and the Iraqi people can therefore have the prospect of future prosperity. The appalling situation, which is necessary at the moment because of what Saddam did to his country, in which 60 per cent. of the population are dependent on vouchers for food aid could be ended. It is a question not of selling off Iraqi oil to the highest bidder, but of ensuring that the substantial wealth is used not for palaces, a power elite at the top or weapons of mass destruction, but for the Iraqi people.

Tony Baldry: No one can doubt the Prime Minister's commitment to the United Nations, but neither can those of us who are instinctive supporters of the United Nations be insensitive to the haemorrhaging of its support in Washington and elsewhere. Does he believe that that can be remedied with a change of attitude by France, China and Russia, or is he suggesting that more fundamental reform of the UN is required if it is to command universal respect again?

Tony Blair: There are issues to do with how the UN works and operates, and some of those will take a long time to resolve. They are well known—membership of the Security Council and so on—but unless the leading countries in the world come to some sense of how we handle similar situations in future, the UN will be ineffective because there will be no agreement between the leading countries. In the end, that is what we have to work on. In particular, the international community—especially Europe—has a fundamental question to resolve: do we want Europe and other countries to develop as a rival to the United States or do we want to work in partnership with it? If it is the former, I do not think that we will resolve such disputes in the UN because there will be the same disagreement that there has always been, as there was in the days of the cold war when the UN often could not work properly because there were two blocs of power that would not support each other's strategic interests. The only way in which we are going to make the UN more effective is by resolving some of those underlying political questions, and that political question in particular.

Clive Soley: Further to that answer, is it not true that part of the rebuilding process requires the UN to take a hard look at how it deals with states that have developed weapons of mass destruction, are brutalising their own people and are destabilising the region, therefore making the middle east, in many respects, the cockpit of violence for so many years? Part of that reassessment must be an ability to deal with—let us face it—psychopathic killers who take over nation states, destabilise the area and kill their own people. We are not dealing with that because the UN was initially set up for a different purpose. The world has changed and we now need to change the UN.

Tony Blair: The point that my hon. Friend makes is right in the sense that such states pose a real threat. However, there are different ways to deal with them. In some circumstances, we can enter into a dialogue with those countries and help them out of the situation that they are in. One thing is clear: the continuation of brutally repressive regimes, allied to weapons of mass destruction, is a threat. That is why we have to deal with them and why the UN has to come together to do that in a concerted way.

Andrew Tyrie: Three times the Prime Minister has been asked about Syria, in response to which he has said that there are no plans to deploy force against Syria. The trouble is that that phrase has been used by the Prime Minister and many others in other contexts just before they have done exactly the opposite—for example, the Prime Minister said, "I have no plans to raise taxes at all." Can the Prime Minister find more forceful language to allay the concerns of the conspiracy theorists?

Tony Blair: Let us not get into manifesto commitments on tax, which were very clear. I think that I have made the position clear enough. If people continue to raise that issue, it can only be because they are not listening to the very clear answer that is being given. I have given that answer throughout our proceedings today and give it again now: we have absolutely no plans whatsoever to invade Syria. I cannot put it any clearer than that. It is clear enough, I think, for most people. What is important is to recognise that no one on the other side of the water, so far as I am concerned, has said that there are such plans. We are in a situation in which I am asked about the latest conspiracy theory. Once it has been laid to rest, I have no doubt that will be replaced by the next one, as I said.

Richard Burden: May I say to my right hon. Friend that I have listened to what he said and have no reason to doubt his sincerity in relation to Syria? However, many of us are deeply troubled by some statements on Syria that have been made by sources around the Pentagon, and sometimes by people in the Pentagon itself and the White House. If we are to win Syria's co-operation for a middle east peace and its confidence in becoming a full member of that part of the world, would not it be better for the United States to be a bit more unambiguous and to acknowledge to Syria that we have some concern about the fact that parts of its territory have been occupied illegally since 1967?

Tony Blair: The best way to resolve that is through a reinvigorated middle east peace process that deals with the Syrian track as well. I have engaged in a dialogue with Syria and its President over the past few months precisely to try, through partnership, to deal with the issues of concern in respect of Syria. I hope and believe that we can deal with them in that way.
	After the debate about whether Syria is harbouring regime figures—to be fair, the president has made it clear that it is not—and when we get the middle east peace process back under way, it will be important for Syria and other countries in the region to stop any support for terrorist groups whose aim is to disrupt the very peace process that everyone wants.

Henry Bellingham: In joining in the Prime Minister's tribute to our armed forces, may I particularly flag up the bravery and professionalism of the aircrew, ground crew and airmen based in Norfolk? Many will be coming home shortly, but others will be staying in the Gulf for many months. Do they not deserve a tax rebate and a council tax rebate? Ironically, they would get the latter if they were in prison.

Tony Blair: We apply the same rules that we have applied throughout. I pay tribute to the families of servicemen and women from Norfolk and elsewhere in the country. This must have been a deeply anxious time for them—it still is—and our thoughts should be with them. We are working to make sure that we bring servicemen and women back home as soon as possible.

Ann Clwyd: May I confirm what my right hon. Friend said at the beginning of his statement? I know from conversations with Iraqis inside and outside the country that there is great rejoicing at the overthrow of Saddam Hussein, and they are extremely grateful for the role that my right hon. Friend played. As he knows, the immediate needs of the Iraqi people are food, water, electricity and sanitation, and I hope that work on those can proceed very quickly.
	I had a telephone call from an Iraqi woman who has lived in this country for many years. She asked me about information concerning the occupants of a certain prison. I asked her who she knew in the prison, and she said, "An uncle." I asked her how long he had been there and she said, "Twenty-eight years." We are short on information about what has happened to the occupants of those prisons, particularly notorious ones such as the Abu Ghraib prison in Baghdad, and I wonder whether my right hon. Friend could obtain some of that information for the 4 million Iraqi exiles throughout the world who will have had relatives in many of those prisons.

Tony Blair: First, it is right to record our thanks to my hon. Friend, who has fought an extraordinary and sometimes lonely campaign to bring home to people the true nature of Saddam's regime.
	As the situation becomes more stable, we are trying to turn our attention to issues such as the prisons. My understanding is that some of them are deep underground, and there are still problems, particularly around Baghdad, in finding their exact location. We are working very hard on that, and I hope that in the next few days we will have greater progress to report. My hon. Friend is right to say that there are many people in the diaspora throughout the world who will be anxious for news of their relatives. I only hope that in the coming weeks we will be able to provide that information.

Mark Simmonds: I have listened carefully to the Prime Minister's chosen and considered words in response to questions about Syria. I should like him to assure the House that not only will there be no invasion, but there will be no air strikes and no military incursions into Syria without United Nations resolutions under chapter VII.

Tony Blair: I really do not think that I can make the situation any clearer. If the hon. Gentleman reads my words he will see that they provide all the clarity that anyone could possibly wish for.

Stuart Bell: The Prime Minister referred earlier to terrorist groups. He also said that most of the fighting in Baghdad is with foreign irregulars. Are not those jihadists from other countries who have no right to be there? Not only are they shooting at coalition troops but they are preventing the Iraqi people from returning to any semblance of normal life.
	If the price of freedom is eternal vigilance, will my right hon. Friend seriously consider setting up a homeland security department that brings together our intelligence and security agencies and other Departments, so that the people of our country can know that the battle against terrorism will continue in a high-profile way, in their interests and in their defence?

Tony Blair: On homeland security, I have nothing to add to the Home Secretary's remarks. As for the foreign irregulars, my hon. Friend is right to say that people have come from several countries in the region and from different parts of the world—people from Chechnya have been discovered. Some are among those who are carrying on the fighting, and some have been carrying on the looting. There is a lot of evidence that the flow of people into Iraq has stopped. Some of those who crossed over from Syria, for example, have returned rather bewildered by what happened to them in Iraq and the way in which the Special Republican Guard treated them. Others will stay and fight because they are fanatics. That is one of the reasons why sporadic outbursts of fighting will continue for some time to come.

Northern Ireland

Paul Murphy: With permission, Mr. Speaker, I should like to make a statement on recent political developments in Northern Ireland.
	The House will recall that, with great regret, we were obliged to suspend devolved government in Northern Ireland in October last year. We were left with no alternative following a series of events that gave rise to serious concerns about continuing paramilitary activity. As a result, it was evident that there had been a breakdown of trust on both sides of the community. It was also clear that an inclusive Executive on the basis set out in the agreement was not sustainable for the time being.
	For six months, the two Governments have been engaged in extensive dialogue about ways of restoring trust and confidence and securing long-term peace and stability in Northern Ireland. The two Governments continue to emphasise what the Prime Minister and the Taoiseach said in their joint statement on 14 October 2002: that the agreement remains the basis for political progress; that they remain committed to its full implementation; that concerns around the commitment to exclusively democratic and non-violent means must be removed; that paramilitarism and sectarianism must end; and that there should be commitment to the full operation of the agreement and to the stability of the institutions.
	The Prime Minister reiterated and developed those themes in a speech in Belfast on 17 October. He made it clear that it was now essential to complete the permanent transition to exclusively peaceful means. We had reached a crossroads, a fork in the road. Acts of completion were needed: the trust necessary for the system to work could not arise from any other foundation. The commitment to exclusively peaceful means should be real, total and permanent. If that happened, we could implement the rest of the agreement, including on normalisation, in its entirety. He also acknowledged concerns about the instability of the institutions: those, too, had to be addressed as an essential part of the way forward.
	Since October, both Governments have been closely engaged with the political parties to find a basis consistent with those principles for restoring devolved government and completing implementation of the agreement. More important, the parties have increasingly engaged with each other, without the Governments present, to the same end.
	Those efforts led to prolonged negotiations at Hillsborough on 3 and 4 March in which the two Governments discussed drafts of proposals with the pro-agreement parties. What became clear by the conclusion of those discussions was that there was a very large degree of shared understanding between the parties on what needed to be done to set the process back on course, However, it was also clear that time was needed for reflection and discussion. The impending election, due on 1 May, would have impinged on that necessary process. We therefore asked the House to postpone the election for a period of four weeks, until 29 May.
	When the President of the United States came to Hillsborough on 8 April, he, the Prime Minister and the Taoiseach said that the people of Northern Ireland and their leaders had a momentous opportunity to ensure that peace was strengthened and political stability secured. Since last October, there have been many hours of intensive discussions between the British and Irish Governments and the pro-agreement parties, which have led to the development of a comprehensive package of proposals. The two Governments judge these to be an excellent basis for acts of completion but, as the Prime Minister made clear at Downing street last Thursday, it is necessary to have absolute clarity about acts of completion. Without such clarity, the trust and confidence needed to restore the agreement's institutions cannot be fully rebuilt. The Prime Minister and the Taoiseach therefore directed further intensive political dialogue, which has continued since last Thursday.
	On 12 April, the Prime Minister and the Taoiseach issued a further joint statement. They said that the two Governments were absolutely committed to upholding the agreement and were determined that it must be implemented in full. They said that all parties and groups had a collective responsibility to fulfil the promise and potential of the agreement. The House will be aware that the Provisional IRA yesterday made a statement saying that it would be passing to the two Governments a statement dealing with the status of its cessation, its future intentions, its attitude to re-engaging with the Independent International Commission on Decommissioning and a process of putting arms beyond use, and a third act of decommissioning. It said that it stood ready to issue this statement in due course.
	I can confirm that the two Governments have received a draft statement from the Provisional IRA. The Governments have studied it with great care and have asked the IRA to clarify a number of questions arising from it. They believe that there has been progress and that the statement shows a clear desire to make the peace process work. The Prime Minister and the Taoiseach continue to believe that we can move to the final implementation of the agreement if there is sufficient clarity and certainty from all sides.
	The people of Northern Ireland deserve the long-term peace, stability and normality that is within reach through acts of completion. The two Governments pay tribute to the vision, dedication and courage shown by all those who have contributed to the work on acts of completion. The two Governments will continue to make every effort to bring about a basis for publishing the package of proposals, but it would not be right to publish the proposals, and they can have no status until the necessary clarity on all sides about acts of completion is in place. I recognise that the steps the Prime Minister and the Taoiseach outlined last October are indeed big steps for all the parties to make.
	The Government will stand by their commitments. We will not ask anyone to surrender their legitimate aspirations. We recognise how significant are the steps that we are asking for, but the prize is huge and historic—for this and future generations. It is a prize that does not forget the past, but draws a line under it and moves on. So, I urge all concerned in this process to redouble their efforts, in order that future generations will stand back and admire the courage of those who took the long view, and chose the road to the future, not the past.

Quentin Davies: I start by thanking the right hon. Gentleman for his courtesy in letting me have an advance copy of the statement and for many opportunities for consultation over the past few weeks, which I much appreciate.
	From time to time, we have had our difficulties and differences with the Government over their tactics in the last year or two, but never over our commitment to the Belfast agreement and, of course, to peace. However, does the right hon. Gentleman accept that in declining to publish the two Governments' proposals in the light of the refusal of Sinn Fein-IRA to date to commit themselves irrevocably to complete decommissioning and ending the IRA as a military or paramilitary organisation he has our fullest support? Does he agree that nothing short of complete decommissioning, verified by the de Chastelain commission and as transparent as possible, will provide any solution? Otherwise, we shall simply face a series of crises over an indefinite future as each new tranche of decommissioning has to be negotiated in turn. Does he agree that it would be a fatal error to allow ourselves to become victims of such salami tactics from Sinn Fein-IRA?
	Is it not the case that, under the Belfast agreement, paramilitary decommissioning should have been completed within two years—by May 2000? Is it not therefore right that Sinn Fein-IRA should be brought to understand that they cannot continue to play games with the peace process and with the rest of the community in Northern Ireland indefinitely and with impunity? Is this not the moment when we should consider other possible approaches and will the Secretary of State discuss that aspect in particular with our Irish partners and our American allies?
	Will the Secretary of State also, and for the same reason, make it absolutely clear that the concessions envisaged in the document that the two Governments remain, at this moment, willing to issue are entirely conditional and contingent, and cannot simply be left on the table indefinitely?
	Pursuing the same theme, does the Secretary of State recognise that, after five years of running after Sinn Fein, the time may be approaching when we may need to plan forward to enable an Executive to operate, if necessary, without Sinn Fein if it still cannot bring itself to take the decision to turn the republican movement definitively into a genuinely and exclusively democratic and peaceful political organisation?
	May I ask the Secretary of State, not for the first time I know, to remove the slightest scope for ambiguity, misunderstanding or self-delusion, especially on the part of republicans, about what is required by ceasing to use the undefined and conceivably elastic term "acts of completion" in his public and private statements? Instead, he should use the concrete terms "the completion of decommissioning" and "the end of the IRA as a military or paramilitary organisation". Would not that best serve the principle of achieving absolute clarity—a phrase, I notice, that the Secretary of State used a few moments ago and which I heartily endorse?

Paul Murphy: I agree with the hon. Gentleman regarding the nature of any statement that might be made by the IRA—it should be clear and people should be able to understand it, right across the religious and political communities in Northern Ireland. I also agree that decommissioning is a vital part of the agreement. There are few of us still in the Chamber today who were present when the Belfast agreement was signed. All of us know that decommissioning was an essential part of it. We also know, of course, that the agreement says that we wanted decommissioning to take place, as the hon. Gentleman rightly said, within two years of the Assembly elections.
	It is important, as the hon. Gentleman also rightly said, to look at the picture as a whole. That is why it is important that we want to deal with the joint declaration in a way that is consistent with the commitment of everybody in this process, which is why we do not believe that now is the right time to publish it. I agree with him, too, on the importance of our allies. Certainly, there have never been better relations between the British and Irish Governments. Particularly in the past number of days, the whole House will have recognised that the unity in the approach taken by the two Governments has been uniquely good for the process. I think, too, that the role of the United States Administration has been particularly significant over the past number of years, but also over the past number of weeks and days, when Ambassador Richard Haas has played an enormously important role in the process.
	The hon. Gentleman is right that, ultimately, we have to ensure that the democratic process in Northern Ireland continues. People in Northern Ireland have been pleased with devolution. They want Ministers who are from Northern Ireland, elected by the people of Northern Ireland and accountable to the people of Northern Ireland. I hope that the days ahead ensure that devolution will indeed be back with us in Northern Ireland.

Kate Hoey: I thank my right hon. Friend for his statement. Does he not think that Northern Ireland people are entitled to transparency when it comes to this issue? Therefore, will he consider publishing the so-called draft statement that the IRA has produced? Does he agree with me that there are people in IRA-Sinn Fein who will never be satisfied with anything that the Government give, or any agreement, unless it means that the people of Northern Ireland are no longer British and are part of a united Ireland? Will he therefore consider that at some stage we may have to accept that Sinn Fein-IRA are no longer entitled to be part of the democratic process in Northern Ireland, and that we shall have to go ahead and try to bring the democratic parties together to work for a devolved Northern Ireland?

Paul Murphy: My hon. Friend refers to the role of Sinn Fein. The reality is that Sinn Fein had about 17 per cent. of the vote at the last elections to the Assembly and as a result of that was entitled to two Ministries in the Executive. I believe that the leadership of Sinn Fein and many people within Sinn Fein are committed to the democratic process. I agree with my hon. Friend that undoubtedly there are people, whether in the republican movement or in other political movements in Northern Ireland, who do not agree with the Belfast agreement. To want a united Ireland is a perfectly honourable course to take, so long as it is achieved by democratic means. The past week has been about trying to ensure that politics in future is exclusively democratic and non-violent. That is what the Good Friday agreement was all about, and that is what we have to achieve.

Lembit �pik: I thank the right hon. Gentleman for early sight of his statement. Does he agree that permanent acts of cessation of violence are ultimately the outcome and that acts of completion of decommissioning are the process? The problem is that there is not real confidence that either has yet been achieved.
	Does the right hon. Gentleman agree that we need to see from paramilitaries more than one-off decommissioning gestures, which could be criticised as apparent public relations exercises rather than strategic intent totally to decommission? Even more to the point, does the right hon. Gentleman further agree that paramilitaries should also be expected to allow exiles back to their homes to ensure that paramilitary activity stops in those communities? Finally, does the right hon. Gentleman agree that while Sinn Fein asks the Government to publish their declaration, the IRA has given no explanation for not having published its own declaration? That sort of opportunism begins genuinely to try the good faith that many of us have shown in believing many of the statements that the IRA has made in the past, claiming that it is genuinely committed to acts of long-term completion.

Paul Murphy: The hon. Gentleman is right that there is no place in Northern Ireland, or anywhere else that claims to be a democratic society, for paramilitarism. There is no room for it. It has gone out of fashion. It is no longer relevant. For those reasons alone, and there are many others, there should be no paramilitarism or paramilitary activity in Northern Ireland.
	The hon. Gentleman is right also in drawing the attention of the House to the important question of exiles. Many families in Northern Ireland want their loved ones back. People want to return to Northern Ireland. Those issues and the issue of victims are the result of 30 to 40 years of troubles in Northern Ireland. They need to be resolved in the spirit of peace and reconciliation. That is what we have been talking about over the past number of months.

Jeremy Corbyn: Does the Secretary of State agree that the principles behind the Belfast agreement were an inclusive future for all political persuasions and traditions in the future of Ireland as a whole, and particularly in Northern Ireland, and that the statement that has been sent to the two Governments by the IRA and the intentions behind it are to be welcomed? Will my right hon. Friend indicate how long he expects further consultations to continue between the two Governments and the IRA so that this matter can be dealt with and there can be full speed ahead to the full implementation of the Belfast agreement?

Paul Murphy: I cannot give my hon. Friend details about the timing because we are still considering these matters. Where he is right, of course, is that there has to be confidence in the process across the political and social spectrum in Northern Ireland. That confidence is built on trust. Until we can rebuild the trust that collapsed during the course of last year, we shall get nowhere in the democratic and political process in Northern Ireland.

David Trimble: The Secretary of State referred in his statement to the Prime Minister's speech at the Belfast Harbour Commission last October and his reference to a fork in the road. Does he also recall the reference in that speech to this not being yet another inch-by-inch negotiation? The Prime Minister's objective was rightly to try to change the way in which things are done, and the expectations with regard to the way in which things are done, but is it not the case that since October we have unfortunately had another inch-by-inch negotiation? Is it not the case, too, that the very limited progress between last Wednesday night and today in terms of the IRA statement shows that the IRA does not feel any compelling need to address the fork in the road? Is not that the problem: there is lots of exhortation, but no significant pressure has yet been brought to bear to compel the IRA to make a choice? Is that not the issue on which the Government should now focus their attention?

Paul Murphy: My experience, like the right hon. Gentleman's, is that things can sometimes go rather slowly in Northern Ireland as long as at the end of the day we get the right result, and the right result in this case is to try to restore the institutions, get devolution back and move forward in the political and peace process. As for the IRA, he and others who have followed the media in the past number of days will have read every editorial in every newspaper, whether in Great Britain or Northern Ireland, that has pointed to the absolute need for the IRA to realise that we have entered a different world in Northern Ireland and that, in 2003, there is no need for paramilitarism.

Mike Gapes: I was pleased to assist my right hon. Friend as his Parliamentary Private Secretary five years ago when he played such a vital role in negotiating the Belfast agreement. He will remember that the clocks were held for some time and we went beyond deadlines until we got an agreement, but does he agree that the clock cannot be held indefinitely and that there is increasing frustration among many of us in the House at the intransigence and obstructionism that now seem to be in evidence? It is time that we made that decisive completion of the full implementation of the agreement.

Paul Murphy: I fully agree with my hon. Friend. He will recall from those weeks and months leading up to the signing of the Good Friday agreement in 1998 that it was sometimes very difficult, very painful and very stressful, but at the end of it we thoughtand I hope we hadthat we had achieved an agreement, on which everyone in the island of Ireland had the opportunity to vote and on which they overwhelmingly voted positively. In that agreement, it says that we should move towards a peaceful, non-violent, democratic society in Northern Ireland. Everyone who signed up to the Good Friday agreement signed up to those principles. He is right in saying that the IRA, like all paramilitary groups, must accept the will of the people.

Ian Paisley: The right hon. Gentleman will remember the 27th day of November last year, when he sat on that Bench beside the Prime Minister and I asked the Prime Minister whether we were going to depend on another statement, or a complete repudiation by the IRA of violence, its disbanding and its ceasing to declare war on the people of Northern Ireland. The Prime Minister was loud and clear in his response:
	It is not merely a statement, a declaration of words. It means giving up violence completely in a way that satisfies everyone and gives them confidence.[Official Report, 27 November 2002; Vol. 395, c. 309.]
	Is the Secretary of State now telling the House that that has been gone back on? He informed me and my colleagues that we would not hear anything about the package because it was not going to be renegotiated. He said that it was going to be put down on the table and that negotiations were over, whereas in the event there has been continual negotiation with the IRAnegotiation that is still evidently going on. Can the Secretary of State tell the House today what he means by legitimate aspirations? In his opinion, has the IRA any legitimate aspirations? Can he spell that out to the House and tell the people of Northern Ireland whether or not we are going to have the election on the day that he set for it?

Paul Murphy: It is certainly not my intention to move the date of the election, which is on 29 May, and the Assembly will be dissolved on 28 April. As to legitimate aspirations, the hon. Gentleman will agree with me that any political party in Northern Ireland has aspirations that are legitimateso long as they are pursued peacefully and democratically. A united Ireland is a perfectly legitimate aspiration; the continuation of being part of the United Kingdom is a legitimate aspiration. All such aspirations are legitimate, so long as they are peaceful and democratic.
	So far as the Prime Minister's statement on 27 November is concerned, I entirely agree with that, as one would expect; indeed, I think that the hon. Gentleman will agree with it too, because it is important that, above all, we commit ourselves to peace.

Andrew MacKinlay: What arrangements are being made for the Office for Democratic Institutions and Human Rights, which is based in Vienna and is monitoring Scots and Welsh elections, to monitor these elections as well?
	I also invite the Secretary of State to consider this. We are acting as proxies. Where are our great allies and colleagues from the Social Democratic and Labour party on this critical occasion? If this issue is so vital for Britain and Ireland, I should tell the Secretary of State that some of us are sick to the back teeth of turning up here when our colleagues who are supposed to represent the nationalist and republican interest do not. The Secretary of State needs to take back this message and spell it out in stark terms: they cannot pretend to be Labour Members of Parliament if they do not turn up on vital occasions such as this. We are sick and tired of it, and the sooner the Labour party organises in Northern Ireland, the better.

Paul Murphy: I do not want to enter into that particular discussion today, but I will take back my hon. Friend's comments to SDLP Members of Parliament. So far as monitoring is concerned, that process applies throughout the United Kingdom, including Northern Ireland.

Brian Mawhinney: Will the right hon. Gentleman accept that he is right to continue to combine political flexibility with certainty and transparency? However, will he also recall that there would have been no agreement had the IRA not made commitments that were accepted by everybody else in good faith, and that it would not be acceptable for the IRA to continue to make similar promises each time around, extracting more concessions from all the other legitimate political parties and the people of Northern Ireland time and again? That is not the way forward in terms of peace and building confidence, or of security.

Paul Murphy: I agree with the right hon. Gentleman that the agreement was founded on everybody who signed it playing their part in it, including parties that represent republicans, nationalists, loyalists, Unionists and others. Through his own experience as a native of, and as a Minister for, Northern Ireland, he understands these matters extremely well. But I repeatas he has repeatedthat at the end of the day, it is a matter of clarity and of transparency.

Tom Harris: Does my right hon. Friend agree that the complete cessation of violence and the complete surrender of all illegally held arms are not concessions but the basic minimum requirements expected of anyone involved in the democratic process? Does he also agree that any ambiguity on the part of the IRA on this point simply plays into the hands of those forces in Northern Ireland, democratic and undemocratic, that want the Belfast agreement to fail?

Paul Murphy: I agree with my hon. Friend, who has played a significant role within the Labour party on these matters. He is absolutely right that what we are asking for is nothing exceptional, but something that the people of Northern Ireland themselves expect.

Peter Bottomley: This is part of coming to terms with history, and the two Governments' co-operation follows the 18 years since the Anglo-Irish agreement. Can the Secretary of State say whether the overlapping leadership of Sinn Fein and the IRAtogether with the leaders of the disloyalists, whose killings have marred the history of Northern Ireland just as much in the past 20 years or soare prepared to give up the chance of publicity and power by violence, and whether they will stop intimidating their own people, just as they threaten people on the other side of the divide?

Paul Murphy: The hon. Gentleman is right to draw attention to the communities in Northern Ireland that have been plagued by paramilitaries on both sides. That, unfortunately, continues, although to a lesser extent than it did. Until it endsand it is an essential part of paramilitary activity, which must endwe will not have a peaceful Northern Ireland.

Jeffrey M Donaldson: The Secretary of State will know that it is taking some time to drag these words from the IRA. Does that not tell us something about the IRA's real intentionsthe fact that it is so reluctant to make a statement that is clear and offers certainty?
	In May 2000, the IRA told us that it would deal with the arms issue in a manner that would maximise public confidence. Instead, it smuggled in further illegal weapons from Florida. The IRA speaks with forked tongue. Is it not time the Secretary of State recognised that? Andhere I echo what was said by the hon. Member for Vauxhall (Kate Hoey)is it not time he worked with the democratic parties to restore a proper democratic institution and administration to Northern Ireland? If the IRA is not prepared to move it must be left behind, and the rest of us must move forward without it.

Paul Murphy: Certainly the IRA, and indeed all paramilitary groups, must recognise the changing times. I agree that there is no place in Northern Ireland for the activities in which they have engaged.
	My hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne), the Under-Secretary of State for Northern Ireland, and Iand, indeed, the other Northern Ireland Ministersconstantly have discussions with the democratic parties about the way ahead, and will continue to do so. At the end of the day, however, the people of Northern Ireland themselves will decide how they are to be represented when the elections happen.

Andrew Hunter: Will the Secretary of State comment on the very strong feeling in Northern Ireland that no further concessions should be made to the IRA in advance of its disbanding and decommissioning totally? Will he also comment on the feeling that the package that is understood to be on offer is an affront both to the principles and practices of democracy and to the rule of law?

Paul Murphy: The hon. Gentleman must wait until he has an opportunity to see the proposals of the joint declaration. SomeI have indicated what they might be on a number of occasions during Question Timewere indeed linked to further progress on the issue of paramilitarism. Others constituted part of the implementation of the Good Friday Belfast agreement, and we must continue with them. They relate to issues such as human rights and equality.

Angela Watkinson: At this year's annual Sinn Fein conference, the president demanded further extensive reforms to policing in Northern Ireland. We already have a 50:50 recruitment procedure, which is restricting recruitment because there are not enough Catholic applicants to match the Protestant applicants. Similarly, if a Catholic trainee drops out halfway through the course, a Protestant must be dropped as well. What further concessions or reforms can possibly be made if the trust and confidence of the people in Northern Ireland are not to be destroyed?

Paul Murphy: As the hon. Lady will know, the Police (Northern Ireland) Act was given Royal Assent only last week. It made a number of changes to the running of the police force in Northern Ireland, including the workings of the Policing Board. I understand the issues raised by the hon. Lady, which are a subject for debate here on another occasion, but what impresses me is the phenomenal transformation of the police, enabling them to represent everyone who lives in Northern Ireland. When I returned there after a gap of three years, those changes in the police were the most significant that I saw.

Paul Goodman: Will the Secretary of State remind the House how many mutilation beatings, shootings, forced exiles and acts of intimidation have been carried out by republicans over the past year? Given those facts, how much trust does he think can be placed in an organisation that speaks the language of peace and justice on the one hand and commits such evil acts on the other?

Paul Murphy: There is no excuse in this wide world for those acts, which, as the hon. Gentleman knows, are unfortunately committed throughout the community. So-called punishment beatings occur in republican and in loyalist areas, and I agree that they should not exist in any civilised country.

David Burnside: At the start of his statement, the Secretary of State referred to the reason for suspending the Executive and the Assembly as serious concerns about continuing paramilitary activity, creating a lack of trust. Will he confirm that the reason why the Government suspended the Executive and the Assembly is that Sinn Fein-IRAthe republican movementwas found to have been involved, from last July to November, in a spy ring within the Northern Ireland Office? Will he also confirm that the Unionist community's lack of trust about ever again being in an Executive with Sinn Fein is based on Colombia, the ongoing investigation into the break-in at Castlereagh police station, Stormontgate and the Ormeau road? Is it not time to move on and have a voluntary coalition between the Ulster Unionist party, the Democratic Unionist party, the ever-absent Social Democratic and Labour party and the Alliance party? That would allow us to get Stormont up and running again without Sinn Fein.

Paul Murphy: The hon. Gentleman is right that the events that he described were responsible for a breakdown in trust between the political parties in Northern Ireland, which led to the suspension of the Executive and the Assembly. On the second part of his question, however, the institutions are based on the Good Friday agreement and the people of Northern Ireland voted for that agreement by a majority. It is therefore our duty to ensure that the agreement is implemented as soon as possible.

Andrew Turner: Does the Secretary of State agree that the democratic parties in Northern Ireland that do not have links to terrorismand, more importantly, the people who vote for themcannot indefinitely be held to ransom by the refusal of the IRA and Sinn Fein to submit to the demands of the agreement?

Paul Murphy: The hon. Gentleman is right that the republican movement must ensure that it is exclusively democratic and peaceful.

Roy Beggs: The Secretary of State has referred several times this afternoon to the agreement, which was voted for by the people of Northern Ireland. Will he accept that the promises made by the Prime Minister prior to that referendum were influential in persuading many people to vote yes? When will the Prime Minister deliver on the promises that he made?

Paul Murphy: The hon. Gentleman refers to what my right hon. Friend said in those days. The hon. Gentleman is right to refer to the fact that we wanted to change the society of Northern Ireland to help it down the road of peace, democracy and non-violence. I think that my right hon. Friend would repeat those assurances. One of the reasons why we have not obtained what we wanted is that we are not securing the clarity that is required under these circumstances.

Point of Order

Andrew Robathan: You will be aware, Mr. Deputy Speaker, that there is a crisis in funding for education in Leicestershire. That is not a party-political point: it is agreed by all the representatives in the county. As a result of the crisis, I wrote to the Secretary of State for Education and Skills asking him to see a cross-party delegation to hear the representations of the people whom we represent. This morning, I received a letter from the Minister for School Standards saying that both he and the Secretary of State were far too busy. That is unprecedented in my experience. May I ask you whether it is unprecedented in your experience and whether the Secretary of State has an obligation to see representatives of the people of Leicestershire, on a cross-party, non-political basis, to hear what they have to say about the rotten funding for their education?

Mr. Deputy Speaker: I share the sense of disappointment felt by the hon. Gentleman. I understand that hon. Members always wish to gain access to Ministers, but I am afraid that that is one of many matters that are not in the domain of the Chair. The hon. Gentleman will have to pursue the matter in other ways.

Smoking (Restaurants) Bill

Gareth Thomas: I beg to move,
	That leave be given to bring in a Bill to prohibit smoking in cafs and restaurants; and for connected purposes.
	I am lucky to represent a constituency that has many excellent restaurants and cafs that I could commend to the House. Among them is the superb Friends restaurant in Pinner, where Harrow's very own celebrity chef, Terry Farrfeatured in no less than The Observer food supplementsupports Government action to ban smoking in cafs and restaurants. Indeed, restaurants such as Friends, and Rules, which is already smoke free and which won this year's British restaurant of the year award, are one reason why London's restaurants are rated among the world's best.
	The one concern about London's restaurants is that, unlike those of California, New York, Ottawa and, soon, Dublin, there are no controls on whether smoking is allowed. I recognise that since 1997 the Government have initiated a series of strong measures to begin to tackle the public health hazard posed by tobacco smoke. The ban on tobacco advertising, the White Paper Smoking Kills, and the 42 tobacco control alliances in England that raise awareness and work to increase the number of smoke-free environments are all good examples of the work that the Government have in hand. However, I want my Front-Bench colleagues to go just a little further.
	Medical and scientific evidence confirming the health hazard of passive or second-hand smoke has been accepted for some time by all except those who are funded by the tobacco trade or who are part of it. The British Medical Association estimates that at least 1,000 people die from exposure to second-hand smoke each year. Evidence from numerous independent, authoritative studies, including one from the Government's science and health advisory committee, has shown that second-hand smoke is a cause of lung cancer, coronary heart disease and strokes in adults as well as cot death, middle ear disease, respiratory infections and the development of asthma in children.
	Just 30 minutes of exposure to second-hand smoke is enough to reduce blood flow to the heart. A non-smoker regularly exposed to second-hand smoke faces a 20 per cent. to 30 per cent. greater risk of lung cancer than a non-smoker who has not been similarly exposed. The most recent analysis of the impact of second-hand smoke on health estimates the number of annual deaths from second-hand smoke in the United Kingdom at 12,000a figure comparable to that for those who died as a result of the great London smog 50 years ago. The figure is also greater than the 10,000 occupational deaths in the UK each year, and it is triple the 3,500 annual deaths from traffic accidents.
	Increasing the number of smoke-free environments is clearly sensible and would protect the health of non-smokers. Making smoking less of a social norm can only help current and potential smokers to fight their addiction. The Government recognised early the need for action and commissioned the Health and Safety Executive to draft an approved code of practice on passive smoking at work. The draft code was ready for introduction in 1999, but it has yet to emerge into the light. The excellent Action on Smoking and Health and the TUC have highlighted the Health and Safety at Work, etc. Act 1974, which places a general duty of care on employers to provide a safe working environment for their employees. We need the Government to take further action through an approved code of practice or through legislation to ensure smoke-free workplaces if we are properly to protect those who work in the hospitality industry, restaurants and cafs from the dangers of second-hand smoke.
	A study of non-smoking employees in the hospitality industry in Australia found that after at least four hours work, employees had four times the carbon monoxide levels of workers in a smoke-free workplace. One third of those studied had carbon monoxide levels consistent with light smoker status. A University college London study in 2001 went further, showing that workers in the hospitality industry in London had levels of second-hand smoke seven times greater than that of the average English non-smoker. Similarly, a study of California bar workers showed that respiratory health among both smokers and non-smokers improved measurably after smoking was banned in Californian workplaces.
	Governments have, over the years, recognised the need to protect the health and safety of employees at work. Considerable effort has been made to deal with the risk of exposure to asbestos, for example. Yet second-hand smoke offers a greater threat to the health of workers than asbestos does. Some in the restaurant trade, already concerned about the impact of passive smoke, have made their restaurants smoke free, and I welcome that. Others who want to be smoke free worry about the proximity of competitors who would allow smokers, and have instead considered the option of ventilation. However, the evidence from America is that ventilation does not work. For that reason, the World Health Organisation concluded some three years ago that there was no safe level of exposure to second-hand smoke and that better ventilation on its own could not achieve a smoke-free workplace. Indeed, the current industry initiativethe public places charter, whose self-stated aim is to resolve the public smoking issue through ventilation and/or no-smoking areasmakes absolutely no attempt to set a level of second-hand smoke that is safe by occupational or environmental health standards, or a level that restaurant owners who adopt the charter should ensure is not breached in their premises.
	Acknowledging those issues, some in the hospitality industry are beginning to speak out for a ban. Mr. David Elliott, who is the managing director of Greene King Pub Partners, highlighted in December the many major cities in the world that have already established a smoking ban with no adverse impact on restaurant owners' incomes. He also noted the impact of nicotine on the fabric of business premises and speculated on the reduction in refurbishment and redecoration costs that a ban on smoking would deliver. Evidence from California shows that sales continued to increase after the state's ban was introduced.
	The excellent Smoke Free London yesterday published a MORI opinion poll showing that almost a third of those surveyed would be more likely to dine out more frequently if they knew that restaurants would be smoke-free. The poll also showed that some three quarters of people thought that staff working in cafs and restaurants should be able to work in a smoke-free environment.
	One of the more miserable arguments that I have heard against a ban is, and I paraphrase, that it would be the nanny state trampling over the rights of individuals to enjoy a smoke or of the individual restaurant owner to run their business in the way that they see fit. It is time that we recognised that second-hand smoke is now the main source of air pollution indoors; that it has an impact on health beyond that of the individual smoker; and that, given the number of deaths and diseases that passive smoking causes, and given the impact that second-hand smoke has on the health of employees, it is surely right for this state to follow the example of so many others and legislate for a ban. We do not allow business men and women to get away with other forms of pollution, and there are already many reasonable duties on employers to protect the health and safety of their work force. This issue is surely no different.
	Many MPs have campaigned successfully for the Government to tackle air pollution outside. Now is surely the time for us to take serious action on indoor air pollution. One hundred MPs from all partiesand I am grateful to themhave told me that they support this proposal. Some, such as my right hon. Friend the Member for Rother Valley (Mr. Barron), my hon. Friend the Member for Huddersfield (Mr. Sheerman) and my hon. Friend the Member for North-West Leicestershire (David Taylor), have been campaigning hard on this issue for some time now. Countries such as France, Norway and Ireland, and states in America such as California, Delaware, Massachusetts and New York, have already taken similar steps. There must be something in a proposal that both American and French legislators agree on at the moment.
	A ban on smoking will not harm restaurant and caf owners' incomes; it may even increase their sales and reduce their costs. This is surely a sensible public health measure to protect the health of British workers and the public more generally. It has already been road-tested for us by a number of other countries. I commend the Bill to the House.

Andrew Hunter: With a declarable interest as a member of the Lords and Commons pipe and cigar and smokers club, I beg to oppose this motion on the grounds that it is illiberal nonsense and wholly unnecessary. Scientific evidence does not justify it; self-regulation is working perfectly well. The health case that the hon. Member for Harrow, West (Mr. Thomas) and others try to present is not justified on available evidence. The majority of workplaces and public places in this country already operate a smoking policyeither being non-smoking entirely, or having designated smoking areas. Such schemes work perfectly well. They are voluntary and do not need the backing of statute. The hon. Member would be well advised to re-read the 1998 White Paper and the firm conclusion drawn therein that no new legislation was necessary. No one is compelled to smoke in any bar, restaurant or hotel. If people object to the smoking policy[Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman, but the House must listen to his speech with the same degree of respect with which it listened to the first speech.

Andrew Hunter: I was pointing out that no one is compelled to frequent any bar, restaurant or hotel. If they do not like the smoking policy, they need not go there. If they do not like the music, they need not go there. If they do not like the patron, they need not go there.
	In short, the prohibition of smoking in cafs, bars and restaurants by means of legislation is not required. Scientific evidence does not demand a total ban. Self-regulation works. We need nothing moreit is a question of freedom and choice.

Question put, pursuant to Standing Order No. 23 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):
	The House divided: Ayes 115, Noes 43.

Question accordingly agreed to.
	Bill ordered to be brought in by Mr. Gareth Thomas, David Taylor, Mr. Kevin Barron, Paul Clark, Phil Hope, Colin Burgon, Mr. Terry Rooney, Kali Mountford, Mr. Mark Todd, Mr. Mark Hendrick, Hugh Bayley and Michael Fabricant.

Smoking (Restaurants) Bill

Mr. Gareth Thomas accordingly presented a Bill to prohibit smoking in cafs and restaurants; and for connected purposes. And the same was read the First time; and ordered to be read a Second time on Friday 11 July, and to be printed [Bill 93].

Orders of the Day

WAYS AND MEANS

Order read for resuming adjourned debate on Question [9 April].

AMENDMENT OF THE LAW

Motion made, and Question proposed,
	(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
	(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide
	(a) for zero-rating or exempting a supply, acquisition or importation;
	(b) for refunding an amount of tax;
	(c) for any relief, other than a relief that
	(i) so far as it is applicable to goods, applies to goods of every description, and
	(ii) so far as it is applicable to services, applies to services of every description.[Mr. Gordon Brown.]
	Question again proposed.

Budget Resolutions and Economic Situation

Mr. Deputy Speaker: Before I call the Secretary of State to speak, I remind the House that Mr. Speaker has imposed an eight-minute limit on Back-Bench speeches.

Patricia Hewitt: This year's Budget once again reflects our values and our central purpose as a Government: equality and opportunity; prosperity for all; social justice; and economic success, at home and abroad. It is in difficult times, however, that values and principles are put to the test, and these are difficult times. There is slow growth all around the world. Profits, stock markets and investment are down all around the world. World trade is falling, which did not happen even in the recession of the early 1990s.
	In the past, when the world economy slowed, Britain's economy crashed. We were first into recession and last out, but not now. Thanks to the tough decisions that we took in our first term, we are now enjoying the lowest inflation for 30 years, the lowest interest rates for 40 years, and faster growth than any other major European economy. We will do nothing to jeopardise those stable economic foundations that have now been tested in bad times as well as good. We will build on them as we face up to the long-term issues and challenges that will determine our competitiveness, the profitability of our businesses and the prosperity of our people.
	The economic map of our world is being redrawn. China is joining the World Trade Organisation, India is producing a quarter of a million science and IT graduates every year, 10 more countries are joining the European Union next year, and others are queuing up behind them. There are new opportunities for our businesses, but new competition from lower-wage countries, too. On top of that, technology and consumer demands are changing so fast that one year's up-to-date skills or new products may be out of date just a few years later. We cannot hold back this technological change or the growth of the developing countries, and we should not try to. We cannot compete on the basis of low-cost, low-skill, low-margin goods, and we should not want to. Our response to even faster change and to even greater competition cannot be protectionism; it has to be innovation. What we need in Britain are the higher value-added products, the faster, cleaner production processes and the virtuous circle of higher investment, higher profits, better jobs and higher wages.
	That is why we are supporting our science base. As we celebrate 50 years since the discovery of DNA and we welcome the publication of the latest findings from the human genome project, we should all be proud of British science. With just 1 per cent. of the world's population, we fund nearly 5 per cent. of the world's science and we produce 8 per cent. of all the world's scientific papers. Of course, that is not how the Conservative party saw it. When it was in government, it cut science spending and, with 20 per cent. cuts in public spending, it would cut science investment again. I am proud of the fact that this Government have increased investment in science from 1.3 billion in 1997 to about 2 billion this year and almost 3 billion by 200506an average increase in real terms of 10 per cent. a year.
	We are also supporting our universities to turn that great research into great commercial success. In recent years, we have seen more researchers filing patents, more universities licensing technologies to business and more spin-out companies, which were running at an average of fewer than 70 a year, but are now up to 248 in the latest year alone. Now the challenge that we face is to get more of our businesses investing in research and development, partnering with universities and applying new technologies.

Brian Cotter: The Secretary of State has referred to investment, which is important. Does she agree that the severe problems that businesses face with increased insurance premiums take away a lot of money that could be invested, particularly in manufacturing? Many people were disappointed that the insurance premium tax was not reduced in the Budget. When will the Department for Work and Pensions report back on the vastly increased insurance premiums for business?

Patricia Hewitt: We are extremely concerned about the impact on particularly smaller businesses of the very steep rises in employers liability insurance and other insurance premiums. I am sure that the hon. Gentleman will, like me, welcome the fact that, in the Budget, my right hon. Friend the Chancellor of the Exchequer froze insurance premium tax, which, in any case, can be offset against corporation tax, which we have also cut. My right hon. Friend the Secretary of State for Work and Pensions will report shortly and the Office of Fair Trading is also looking at whether there are problems specifically within the insurance market that need to be tackled from the competition point of view.
	We are supporting businesses and giving them the right incentives to increase their rate of innovation. For example, the research and development tax credit already supports businesses to the tune of 400 million a year. Now we are increasing the scope and the value of the credit, and we will consult business on how to improve its operation even further.
	We are also giving businesses the right support for innovation. My Department's smart awards for prototypes and technology development help 800 companies a year. The awards help companies such as Cooke Optics in Leicester, which received a grant of 140,000 to develop the high definition film lenses that were used to make the film Chicago, and Nanomagnetics in Bristol, which has just set a world record for computer information storage. In six months, it expects to beat that record again. It was helped by a grant of 160,000.
	That is not all that we are doing to help smaller businesses get the funding that they need. At the request of business, we have extended the small firms loan guarantee scheme. We have created regional venture capital funds80 million of public funding that is attracting another 250 million from private investors. All that is threatened by the Conservative party and its pledge to cut public spending by 20 per cent. It would do less; we will do more.
	In the United States, small business investment companies are backed by the Government, and that has helped companies such as Apple Computers, Compaq, the Intel Corporation and AOL to move from being start-ups to world beaters. We want our smaller businesses to have the same opportunities, so we shall look at the scope for similar support in Britain.

Alistair Burt: The right hon. Lady is projecting herself as the champion of small businesses. Why did she reject the recommendations in the Federation of Small Businesses' Budget submission to rescind the increases to national insurance contributions and for a full review of the climate change levy? Does she not understand the damage that both those measures are doing to small businesses?

Patricia Hewitt: We have responded to representations from the small business community by cutting corporation tax for small businesses. I am sure that the hon. Gentleman is aware that the contributions required from small and large businesses in France, Germany and the United States to fund health coverage and health services for their workers are far higher than those that result from the 1 per cent. increase that we have introduced to fund the necessary investment to create a world-class national health service, which has been welcomed throughout the country.

Bob Blizzard: I welcome the measures in the Budget to support small businesses. Lowestoft, in my constituency, also benefits from the fact that my right hon. Friend's Department designated it as a zone with assisted area status. However, the threshold for a business to apply for such assistance at level 2 is 500,000, which is rather a large investment to be required of small businesses in my constituency. Will she examine whether the threshold could be made more flexible?

Patricia Hewitt: Of course we shall examine that. I am sure that my hon. Friend will welcome the fact that the provisions in the Budget make it easier for small companies to apply for enhanced capital allowances and have extended the help that they may receive in enterprise areas.
	Our constituents depend on small and medium-sized businesses for their prosperity. Such businesses create half our country's wealth. They employ some 12 million people and produce nine out of 10 of the new business ideas on which our future prosperity will depend. We need more such small firms.

Ian Gibson: Will my right hon. Friend acknowledge the enterprise shown by the Chancellor of the Exchequer in developing a partnership between the Massachusetts Institute of Technology and Cambridge university? Indeed, MIT graduates have created 4,000 firms and about $5 billion of capital. Surely we need to develop such joined-up partnerships through which we can learn from each other.

Patricia Hewitt: My hon. Friend is absolutely right. The partnership between MIT and Cambridge university will not only benefit Cambridge and the east of England; it is already benefiting entrepreneurs throughout the country by showing them the huge advantages of spin-outs from universities and tie-ups with new technology.

Barry Sheerman: I hate to intervene straight after my hon. Friend the Chairman of the Select Committee on Science and Technology, but does my right hon. Friend agree that small businesses value participation with their local universities? It is all very well for Cambridge and Oxford universities and Imperial college to have even greater research capacity, but many smaller universities need the ability to transfer technology to work with small companies.

Patricia Hewitt: My hon. Friend is absolutely right, which is why my right hon. Friend the Secretary of State for Education and Skills and I put forward a strategy in the White Paper on higher education this year and the White Paper on innovation last year to ensure that every university in our country, whether or not it is engaged in world-class research, will have a role to support businesses in its regions and communities. The additional money that we are giving to the higher education innovation fund will enhance that important knowledge-transfer role. We need more such small firms, whether they are spin-outs from universities or directly created by entrepreneurs. Business leaders have welcomed the measures in the Budget to promote entrepreneurship.

Roger Williams: Many small businesses are owned by sole traders or small partnerships, so any reduction in corporation tax passes them by. The major hurdle is often employing the first person because of all the administration that goes with running the pay-as-you-earn system. Could the Government do something to subsidise or help people who take the first step toward expansion?

Patricia Hewitt: The hon. Gentleman makes an important point. That is why we have simplified the process of taking on employees and why we are implementing the reforms recommended by Patrick Carter to simplify payroll administration. That is why the Small Business Service has just published a one-stop guide for entrepreneurs that covers employment issues. The simplification of the national insurance system that we introduced several years agosomething that the Conservative party never did when it was in governmenthas been a particular help to such small businesses.
	Business leaders have welcomed the Budget's measures to promote entrepreneurship, such as extending enhanced capital allowances to more small firms, simplifying value added tax200,000 more small firms will benefit from the simple flat-rate VAT schemeand increasing the small and medium-sized enterprises thresholds in the Companies Acts to the maximum allowed by the European Union.
	However, we need local and regional action in addition to national action. We cannot raise the business birth rate in the north-east, which is only half that of the south-east, by taking decisions in London. As the Budget recognises, the real experts on the strengths and needs of a city or region are those who live, work and run businesses there. Our regional development agencies, with strong business and trade union leadership, are now delivering on their regional economic strategies. Of course, Conservative Members would abolish the RDAs, which would once again centralise decisions here in Whitehall. They should look at the successes of the RDAs, such as the technology corridors in the west midlands that are linking the university and science base with businesses and attracting new entrepreneurs. The science partnership in the north-west is helping to create new biotechnology and advanced manufacturing businesses.

Mike Hall: My right hon. Friend has drawn attention to the work of the RDAs. May I draw her attentionalthough I do not need to because she already knows about itto the Daresbury science park, which will exploit the science that will come from the fourth generation light source? I congratulate her on her decision to site that at the Daresbury laboratory in my constituency because it is a wonderful example of the north-west coming together with a fantastic idea on which universities can build with the economic community in the north-west.

Patricia Hewitt: I am grateful to my hon. Friend for that comment. When I visited Daresbury, I saw at first hand the outstanding science and research that is conducted there. It is entirely due to the efforts of the RDA that we have been able to create such science and business partnerships in the north-west. We are backing the fourth generation light source in Daresbury and we recently announced the creation of a biotechnology incubator centre in Merseyside, with the support of the RDA and central Government.

Alex Salmond: On the subject of regional development, will the Secretary of State comment on regional pay and the Chancellor's ambition for regional price indices to determine pay in the regions of England, Scotland and Wales in comparison with the much higher pay for police officers, nurses and firefighters in London and the south-east? Will she explain exactly how lower pay for key public sector workers will benefit the regions of England, Scotland and Wales?

Patricia Hewitt: The hon. Gentleman is somewhat confused, as is so often the case. No one is proposing the abolition of national pay bargaining for the public services. The agreement in the Prison Service makes it amply clear that the necessary flexibility can exist in a nationally bargained pay framework to meet the problems of higher costs of living and specific skills shortages in different areas. Such local flexibility exists in the nationally bargained framework for the Prison Service and, of course, it is provided for in most of our public services through the London weighting. Indeed, I think that the hon. Gentleman wants Scottish weighting, so he should be supporting the greater flexibility to meet local needs, which we are proposing in the Budget.

Keith Vaz: My right hon. Friend is right to commend the Budget's positive aspects, but she is a euro-enthusiast in the Cabinet. Has she had any further information from the Chancellor about the Treasury report that was widely leaked in the newspapers this morning? Does she know whether a decision has been made on that matter?

Patricia Hewitt: My hon. Friend knows better than to believe everything that he reads in the newspapers. As the Chancellor said last week, we will make and announce our decision on the single currency in the first week of June.
	There is more that we can do to build closer partnerships between science and business and to create the foundation for the new businesses and industries of the future. I have asked the chairman of the north-west science partnership, Sir Tom McKillop, to work with the other regional development agencies as they establish similar partnerships in every region.

David Laws: We understand that we may have to wait until the first week of June to hear the Government's decision on the five tests, but can the Secretary of State tell us whether the assessment has begun?

Patricia Hewitt: As the Chancellor has said, the work on the five tests has been carried out in the Treasury. We will make our assessment and announce our decision by the first week of June.
	I return to the issue of how we create strong foundations for regional and local economies. We need local businesses, trade unions, further education colleges and universities to work together far more effectively to respond to the need for employment and skills throughout our country. Thanks to our policies of steady economic growth, welfare reform and the new deal, we already have 1.5 million more people in work than six years ago; we have slashed long-term unemployment, and we have virtually eliminated it among young people.
	There is more to do, however. Unemployment is far higher in the African-Caribbean community and in some of our Asian-British communities, and even graduates from those minority communities earn less than their white counterparts. Far too many people in their 50s and 60s with skills and experience to contribute to business and the economy are told that they are too old even to get an interview. Far too many women are still held back, undervalued, underpaid and unable in many cases to get the working hours that they need to give of their best at home and at work. Indeed, if women were starting businesses at the same rate as men, another 100,000 new businesses would be started every year.
	We on this side of the House believe in equality as a matter of principle, but we also know that in a world of increasing competition, where companies and countries need every individual to contribute their abilities and skills, equality and economic success go hand in hand. That is not the Government telling business what to do; it is what business is telling the Government.
	I recently visited one of our successful car plants in the west midlands. The managing director said, Look around. This industry has always been dominated by white men, but the work force are not 90 per cent. white men and nor are the customers. If we in this company are going to be the best, we have to recruit and keep the best people, and that means attracting people from every part of the community. We will support and encourage that business and others like it to put policies for diversity and equality of opportunity at the heart of their strategy to create those high-performance workplaces that will make and keep them competitive in our increasingly competitive world.

Angela Eagle: I welcome my right hon. Friend's well-known commitment to equality. She has just made a case for simplifying equality and anti-discrimination laws by bringing them together in one new equality law that includes all the new definitions of discrimination. That would be easier for business to deal with. Is my right hon. Friend considering introducing such a Bill and a proactive duty to promote equality, like that in the Race Relations (Amendment) Act 2000?

Patricia Hewitt: As my hon. Friend will be aware, we are currently consulting on the creation not of a single equality law, but of a single equality body, which will bring together the existing anti-discrimination and equality commissions and possibly make it far easier for businesses and other organisations to get the information and advice that they need.
	As we spread opportunity and prosperity here in Britain, so, too, we must create opportunity and prosperity abroad.

Matthew Taylor: Before the Secretary of State moves on to the situation in the wider world, perhaps she could touch on one subject at home that she appears to have forgotten in her speech so far. If things are going so well in the British economy, why has business investment in this country collapsed further than it has in France, Germany, Italy, America and Japan? In fact, it is worse than in any other country in the Organisation for Economic Co-operation and Development with the exception of Iceland.

Patricia Hewitt: The hon. Gentleman is ignoring the fact that business investment in Britain remains higher than it was in 1997 and higher than it was when it plunged under the Conservatives. At a time of great uncertainty, when export markets around the world are collapsing, businesses face difficulty in investing. Thanks to decades of boom and bust, this country has a long history of under-investment. We are creating the economic stability, sustained economic growth and low interest rates that will give business the incentive to invest and prepare for the upturn that will come.

Nicholas Soames: Does not the right hon. Lady understand that her Government have taken about 50 billion in corporate taxes from productive and enterprising corporations? If one does that, one is bound to cut the amount that goes into those companies for investment, and that is precisely what she has done.

Patricia Hewitt: We have cut the rate of corporation tax; it is lower than it has ever been in British history. Our reforms to capital gains tax give us a more favourable environment for entrepreneurial investment even than the United States. As I have explained, and as we set out in the Budget, we have put in place the incentives for investment and the low long-term interest rates that will help business to make the investment that is so badly needed in our country.

Peter Lilley: Will the Secretary of State spell out what steps she intends to take to ensure that British industry plays as prominent a role in the reconstruction of Iraq as our armed forces did in its liberation? She will recall that in the months prior to the liberation of Kuwait, I set up a task force, largely manned by business people, which operated in the Gulf and in Washington, lobbying to ensure that we obtained a fair share of the contracts. Mercifully, there was less destruction than we anticipated, but we obtained a larger share of contracts than we anticipated, not least in rebuilding the oil fields. We were able to publish a prospectus, setting out what Britain could do. Will the right hon. Lady spell out

Mr. Deputy Speaker: Order. That was a very long intervention.

Patricia Hewitt: I have already ensured that in awarding contracts, USAID, whose policy, I regret, ties American aid to contracts for American companies, will properly consider as partners British companies with great expertise. Only last week, Baroness Symons, the Minister for Trade and Investment, met British businesses that are interested and have the expertise to offer. An official from British Trade International is already in the middle east working with the Office for Reconstruction and Humanitarian Assistance to ensure that the expertise and experience of British companies is placed at the disposal of the Iraqi people as they start to rebuild their economy following Saddam Hussein. We are making sure that British business gets the backing it needs, but I hope that the right hon. Gentleman agrees that, rather than revert to that old and discredited policy of tying British Government aid to British contracts, we should back British companies to win based on the expertise and experience that they offer the Iraqi people.

Tony Cunningham: I had a meeting with 15 chief executives of major companies in my constituency. Fourteen were either expanding, investing or creating new jobs. On a separate issue, we have discussed new technology and small and medium-sized enterprises. Many such businesses are joiners, plumbers, electricians and so on. Can more be done in the field of modern apprenticeships?

Patricia Hewitt: I entirely agree with my hon. Friend. That is why we are expanding the modern apprenticeships programme. He will find in the skills strategy, which my right hon. Friend the Secretary of State for Education and Skills will publish later this year, clear proposals to ensure that local learning and skills councils and sector skills councils work to ensure that the skills system delivers the skills that businesses and individuals need to get on.

Linda Perham: I am glad that my right hon. Friend has mentioned skills; may I add productivity? She will remember that last year the Government produced a manufacturing strategy. What measures in the Budget does she think will assist that strategy to increase productivity and skills in this country?

Patricia Hewitt: I have already referred to the various measures in the Budget that will support the manufacturing strategyfor example, the improvements in the research and development tax credit and support for science and innovation. Let me underline the fact that that industrial strategythe first UK industrial strategy for 30 yearsis already beginning to deliver results. As we look at the work of the Manufacturing Advisory Service around the country, we see significant productivity improvements in the manufacturing companies that take advantage of that service. I am sure that my hon. Friend and other hon. Members will work to draw the benefits offered by the MAS to the attention of manufacturers in their constituencies.
	What do we need to do internationally to secure opportunity and prosperity? At the end of the second world war, Europe had been torn apart, having suffered the nightmare of concentration camps, millions of displaced refugees and the destruction of its industrial strength. In that crisis, Europe's leaders understood that peace and prosperity must go together. Six countries set out to bind their economies together with the great aim of ending war between their peoples. Those six countries, by choosing to integrate their economies, to remove barriers to trade and to work together on issues of common interest laid the foundations of half a century of peace and prosperity.
	As my right hon. Friend the Prime Minister said earlier this afternoon, we must now rebuild international relationships that have been fragile in recent weeks. The United Nations must unite again to support the Iraqi people as they rebuild their country after the tyranny of Saddam Hussein. Through the World Trade Organisation, we have the opportunity to bind together the developed and the developing countries in a new framework of rules for trade that is fair as well as free. All of us in Europe and throughout the developed world must now redouble our efforts to deliver on the promises that we made when we launched the Doha development round 18 months ago. If we halved the protectionist barriers to world trade, we would boost the incomes of developing countries by 150 billion a yearthree times the total of all aid budgets. We would cut the number of people living in poverty by more than 300 million by 2015. We would provide the boost to confidence and investment that the world desperately needs at this time of economic uncertainty and political division.
	The Budget builds on the success that we achieved in our first term and faces up to the challenges ahead. It is a Budget for social justice and economic prosperity at home and abroad. I commend it to the House.

Tim Yeo: I draw the House's attention to my entry in the Register of Members' Interests.
	Few of those working in small and medium-sized enterprises with whom I have spoken in the past eight months will recognise the picture that the Secretary of State for Trade and Industry has just painted, or the fantasy world that she appears to inhabit. Her self-congratulatory remarks and her complacent tone will cut little ice with someone running a business who is stuck in the office for an extra half hour each Friday evening filling in the forms that Government Departments have sent out, or perhaps reading the 200 pages of guidance that the Engineering Employers Federation has had to send to firms merely to explain how to comply with the right hon. Lady's latest employment policy changes.
	Five days after the Budget was delivered, it looks no better than it did last Wednesday. Neither the Chancellor nor the Secretary of State for Trade and Industry shows any sign of understanding the challenges faced by British business, of recognising the burdens that they have placed on British employers, or of addressing the needs of the nation's wealth creators as they struggle to remain competitive. The truth is that, despite all the micro-initiatives with which the Chancellor tried to divert attention from the flaws in his overall policy and the gaps in his arithmetic, under the Labour Government Britain is becoming a worse place to do business.
	After six years of Labour government, Britain's deficit in traded goods is the largest since records began, in 1697. The most recent trade figures were released on the morning of the Budget itself. The Office for National Statistics, whose independence thankfully allows it to escape the influence of Alastair Campbell's spin doctors, concluded baldly in its press release:
	The latest estimate of the trend suggests that the UK trade deficit is widening.

Iain Luke: If the Government's policies are so bad for business, especially small businesses, how does the hon. Gentleman account for the 14 per cent. increase in small business creation that we witnessed last year despite the downturn in the global economy?

Tim Yeo: I recommend that the hon. Gentleman consult bodies representing small business, such as the Federation of Small Businesses, to find out what they think.
	The hon. Member for Truro and St. Austell (Matthew Taylor) referred to business investment. The fall in business investment last year was the worst since 1991 and the second worst since that series of statistics was first collected in 1966. The Chancellor likes to compare the British economy's performance with that of our competitors abroad, but, as the hon. Gentleman pointed out, the fall in business investment in Britain in the past two years has been sharper than in America, Germany, Japan, France, Italy, Canada and Spain. Even the Chancellor himself now admits that business investment will fall again in 2003.
	Last year, productivity in Britain rose at only half the rate at which it was rising when the Conservative Government left office. More days were lost through strikes last year than in any year since 1991. On average, more than 2,000 manufacturing jobs have been lost every week over the six years of Labour governmenta total of more than 600,000 manufacturing jobs lost in the past six years. We did not hear much in last Wednesday's Budget statement or in the Secretary of State's speech this afternoon about deteriorating trade, falling investment, slower productivity growth, worsening industrial relations, or haemorrhaging manufacturing jobs. Is it not time the Chancellor and the Secretary of State put away their rose-tinted spectacles and started to admit what is really happening?

Tom Harris: The hon. Gentleman mentioned economic growth, but may I draw his attention to The World in 2003, published by The Economist, which is hardly known for being sympathetic to the Labour party? It states:
	In the decade to 2002, Britain enjoyed stronger real economic growth than any other G7 country apart from the United States. It beat even America's record in terms of GDP growth per head. More surprisingly still, Britain has managed to combine all this growth with a world-beating inflation performance and one of the world's strongest currencies.
	Does the hon. Gentleman take that magazine?

Tim Yeo: I am grateful to the hon. Gentleman for drawing attention to the extraordinary success achieved by the last Conservative Government and the long-lasting foundations for economic success that we had laid when we left office in 1997.
	I guess that we did not hear much from the Secretary of State about the trends to which I referred because they show that, while the Government have been in office, Britain has indeed become a worse place to do business. Even the successes that the Chancellor is fond of trumpeting are not always quite what they seem at first sight. The current low level of unemployment, for example, conceals the fact that jobs in the productive wealth-creating sector of the economy are now starting to fall. That fall is masked in the overall jobs figures by the increase in public sector jobsa trend that in the long term is unsustainable. Lower Government borrowing is another of the Chancellor's favourite boasts, but the number of people who believe it is falling fast. Last year, the Chancellor told us that borrowing this year would be 13 billion. Last week, he said that it would be 27 billion. Two years ago, the Chancellor's five-year borrowing forecast was 30 billionby last week it had shot up to 118 billion. On growth, last November the Chancellor had to downgrade his forecasts, and last week he had to downgrade his forecasts again.

Derek Foster: To interrupt the hon. Gentleman's catalogue of doom and gloom for a moment, in the broad sweep of economic history of the 60s, 70s, 80s and 90s, can he tell me of another Government of any complexion who achieved low inflation and, simultaneously, low unemployment and continuous economic growth for six years?

Tim Yeo: It is precisely because the Government are enjoying, as other countries are, unprecedentedly benign inflationary conditions that the facts that I have just referred to are so alarming. If this country cannot take advantage of those extraordinarily favourable conditions and if, despite low inflation, investment and manufacturing jobs are falling, productivity growth is slowing down, trade is getting worse and all the other indicators point in the wrong direction, that suggests that something is very wrong at the heart of the Government's economic policies.
	A Chancellor who has downgraded his forecasts twice in four and a half months is in the position of a finance director who has been forced to issue one profit warning in November and another one only four and a half months laterand we know what happens to finance directors with a record like that. Perhaps it is not only the shareholders who are getting restlessperhaps the chief executive himself is starting to have doubts as well. Even if the finance director does not get his cards from the boss next door, he may run into trouble with the Financial Reporting Council, because he is no slouch at massaging the accounts, either. His boasts about how he has cut the level of public debt conveniently ignore the huge off-balance-sheet liabilities that he is piling updebt that he does not like to admit to but which taxpayers directly or indirectly will have to service sooner or later: debt that now amounts to tens of billions of pounds.
	This Budget has been called a hope for the best Budget by the Institute for Fiscal Studies. The Chancellor looks more and more like Mr. Micawber. Business people might call it a penny in the pound Budget because the net effect of the Budget measures will be to reduce the tax burden on business by 55 million, compared with the 4.5 billion hit that employers and self-employed people suffered last year when national insurance contributions were raised. Far from being the Budget for business, as the Chancellor's spin doctors claim, the Budget's most obvious feature, from business's point of view, is its complete failure to reverse the damage done in his previous Budgets. There is no action on national insurance contribution increases, which, a British Chambers of Commerce survey warned, will lead one firm in five to cut jobs; one firm in six to cut investment; and one firm in seven to cut pay. There is no action on the climate change levy, rightly described by the Engineering Employers Federation as
	a levy which punishes competitiveness and initiative by world-class UK manufacturing companies... one of the most badly designed and ill-conceived economic instruments of recent times, a device for raising revenue rather than a serious attempt to encourage energy efficiency.
	There is no action on the pensions tax, which is draining occupational pension funds of 5 billion a year, forcing companies to find an extra 4 billion a year in pension contributionsmoney that is no longer available for investment in the productivity-related job-creating improvements that would make Britain more competitive. That tax is now costing 12 million people an average 400 a year; has contributed to the collapse of the stock market; and is systematically destroying what was once the jewel in Britain's savings crown, our occupational pensions schemes. After the Chancellor has done his worst, a typical personal pensions saver would enjoy a pension, if he retired today, that is only half what he would have got five years ago.

Bob Blizzard: From what the hon. Gentleman has just said, can we conclude that he is committing his party to reversing the 1p increase in national insurance, to abolishing the climate change levy, and to reversing what he calls the pensions tax?

Tim Yeo: I am glad that the hon. Gentleman has raised that, because I agree with what a shadow Chancellor said:
	You are asking questions that no shadow Chancellor without seeing the books, without being in a position to know what the true state of the public finances is, without having all the information about the economic circumstances, should answer. I will only make promises that I can deliverI will not make promises I am not in a position to deliver.
	That was said not by the present shadow Chancellor, my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), but the last Labour shadow Chancellor, the present Chancellor of the Exchequer. He said that not three years before a possible general election, but three months before the 1997 election. I agree with him, especially because the clearest single message from the Budget is that we cannot trust the Government to get their sums right. We will need to see the books before we can be sure how and when we will deliver our commitment to be a lower tax party than Labour.
	The problems that I referred to with national insurance contributions, the climate change levy and pensions stats were created by the Chancellor in previous Budgets. Those are the problems that he should have addressed in this Budget, as they are making Britain a worse place in which to do business. As Martin Temple, the director general of the Engineering Employers Federation, put it:
	Just because the Chancellor has stopped hitting us over the head, doesn't mean we should suddenly be grateful.
	David Bishop of the Federation of Small Businesses said:
	This blend of rehashed announcements and tax freezes is not good enough.
	Ernst and Young described the Budget as utterly uninspiring for companies with 250 employees. The tragedy is that this is happening after a decade and a half in the 1980s and early 1990s when our competitive position was transformed for the better under the previous Government. At a time when investment and hence jobs are more internationally mobile than ever, investment that might once have been made in Britain is now as likely to go abroad. Industries in which Britain led the world in the 20th century may now migrate to China in the 21st. Those are precisely the circumstances in which the Government should seek to lighten the burden of tax and regulation that they have placed on business.

Tony Cunningham: So what message would the hon. Gentleman give a small business man in my constituency, a painter and decorator who recently told me that his business had never been so buoyant? However, he could remember struggling in the mid-80s and early 90s even to buy the petrol to put in the van to get to a job.

Tim Yeo: I would tell him to vote for a Member of Parliament who would truly reflect the concerns of small business, instead of one who spouts the line given them by the Government Whips.
	Business is worried not only about the damage that the Government have already done, but about future damage. As the Financial Times put it in the Lex column on Thursday, the Chancellor
	has just placed a large bet on a rapid rebound in the economy next year.
	His sums are based on the assumption that economic growth will bounce back to an above-trend growth rate from 2004 onwards, but that view is not shared by many independent forecasters.
	To balance the books, the Chancellor is relying on a combination of further unsustainable rises in consumer spending, despite the fact that personal debt has already soared and the savings ratio is only half what it was when Labour took office. He also expects a big rise in corporation tax receipts over the next two years. Even businesses do not expect a big rise in profits, and the Budget changes have done nothing to make such a possibility more likely.
	The Secretary of State made much of the micro-measures in the Budget, and I suppose that we should be thankful for small mercies such as the modest simplification of VAT and the slightly more generous treatment of research and development expenditure, but those proposals are tiny in their impact compared with the extra 15 billion a year that the CBI estimates Labour's new tax and regulations are costing business. Stephen Alambritis of the Federation of Small Businesses said:
	What businesses were really looking for were targeted tax cuts on insurance premium tax. But instead there was a lot that was rehashed and had already been announced.
	Indeed, there are, in addition, new burdens on business resulting from the Budget. Under a typical new Labour heading, Modernising stamp duty, the Red Book unveils the Chancellor's proposal to raise stamp duty on leasehold commercial properties. As the CBI says:
	These proposals will seriously increase the cost of leased business properties for many companies. The increases could be devastating for high street businesses.
	The Chancellor has also taken a gratuitous swipe at the beleaguered agriculture sector through a hike in the tax on red diesel, which between now and March 2005, the Treasury estimates, will raise revenue 38 times more than the value of the cut on bioethanol. If the Secretary of State were doing her job properly, she would be fighting the proposals coming out of the Treasury and elsewhere, which are making Britain a worse place to do business. Instead, she is busy endorsing the Higgs proposals lock, stock and barrelproposals that threaten to impose a one size fits all approach to the corporate governance of every one of the huge and diverse range of quoted companies; an approach that ignores the estimated 200 million price tag and the concerns of many experienced business people over potentially divisive aspects.

John Bercow: My hon. Friend is making a powerful case. Given that, legitimate social policies apart, the sea of new regulation is deeper and more hazardous than any with which businesses in this country have had to contend, will his review of regulatory policy consider the merits of the Regulatory Flexibility Act 1980 and the Small Business Regulatory Enforcement Fairness Act 1996? They have yielded real benefits to small and medium-sized companies in the United States.

Tim Yeo: It will indeed, and my hon. Friend makes an important point. We need a complete cultural change in Whitehall's attitude to regulation. We must get away from the assumption that every time something goes wrong it is the Government's job to prevent it from happening again by introducing a new regulation. The cost of that attitude over the years to customers, employees and shareholders has been enormous, although often hidden as well. That cost grows every day, not just in higher prices, but in lower wages, smaller profits and less investment. It is paid in jobs, which go abroad, and in capital investment, which goes to create jobs in countries other than Britain.

Linda Perham: Did the hon. Gentleman not hear the Chancellor say in his statement that he hopes to invite the CBI, the Institute of Directors and others to second experts to look at removing unnecessary regulations? Does he not welcome that?

Tim Yeo: I hear the Chancellor say something about the need to lighten the regulatory burden in every Budget speech he makes. In the following 12 months, without exception, that burden increases. I have stopped paying much attention to the Chancellor's commitments on regulation, which are not credible.
	At a conference last week, the Secretary of State boasted about the latest employment regulations, which will further complicate the running of thousands of small and medium-sized enterprisesanother burden that the Government are gratuitously placing on business. I am sorry that she did not respond more positively to my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) when he suggested that she might take action, now that hostilities in Iraq thankfully appear to be entering the concluding phase, to help to ensure that those British businesses with relevant expertise can offer it to assist the reconstruction process. As my right hon. Friend said, 12 years ago, the Conservative Government published Reconstructing Kuwait. I hope that this Government will consider publishing a similar document to ensure that the Iraqi people are given every possible assistance in the speedy rebuilding of their communities.
	This is a bitterly disappointing Budget. In the past year, taxes have risen for employers, employees, pensioners, savers, home owners, tenants, drinkers, smokers, drivers and businesses. Despite all those huge tax rises, the Chancellor still cannot make his sums add up, so he is having to borrow more and more and more. After six years of new Labour government, the Chancellor, who inherited a better economic legacy than any of his predecessors for half a century, is taxing more, borrowing more, spending more, wasting more and failing more. His forecasts were wrong last April and wrong last November. British businesses and British taxpayers worry that they were wrong again last week. The price of his mistakes is being paid by the British peoplemistakes for which, one day, those same people will surely hold him and his colleagues to account.

Several hon. Members: rose

Mr. Deputy Speaker: Order. Before I call the next speaker, I remind the House that Mr. Speaker has placed an eight-minute limit on Back-Bench speeches, which applies from now on.

Denzil Davies: Budgets, no doubt, are never easy, and this year's presented a number of difficulties caused by the decline, or slowdown, in the global economy and, obviously, the war in Iraq.
	Wars cost money. The Roman emperors, I seem to have read at one time, used to complain bitterly about wars in Mesopotamia, which cost more than wars in other places. Apparently, one of the largest costs was the replacement of siege engines, and the replacement of the modern siege engines will have to be paid for. I do not know how the Roman emperors did that, but Governments traditionally and usually pay for wars by borrowing money or, indeed, by printing it. That creates growth in the short term, which may be what happens this time, but the global economy was slowing down before the war broke out.
	Prices of many goods have been falling, and the new global capitalism operates in a world with almost unrestrained freedom of movement of goods, capital and technology and in which multinational companies can invest almost anywhere that costs are at their lowest. Arguably, that new global capitalismit is certainly new over the past 100 yearsis inherently deflationary, especially for western industrialised countries. There is enormous pressure on prices, which have to be driven down all the time. Costs then have to be reduced, but there comes a point, of course, at which businesses often cannot reduce their costs further. The net effect is that companies and businesses cannot make profits. Inflation may fall close to zero or to it, but so do interest rates and growth.
	One country that has been there or thereabouts, and is still there or thereabouts, is Japan. I well remember that, in the 1970s, shock and awe were aroused by the power of Japan's industrial companies, which produced high-value goods of excellent quality at competitive prices. It turned out, however, that most of those companies never made any profits. They were financed not by profits but by borrowing from Japanese industrial banks, which lent money to those companies, partly, it seems, for patriotic reasons. By not making any profits, those companies drove away investors, who instead turned their attention more to capital assets. As a result, Japan had its asset boom and its asset bust, from which it is still trying to recover. Apparently the Japanese Government's latest proposal to solve the problem is to nationalise the banks. I am not sure whether that will work.
	I will not say that Germany might going the same way as Japan, but, as my right hon. Friend the Chancellor of the Exchequer told us in his Budget statement, its growth is about 0.5 per cent. I suspect that its inflation rate is about the same. That is not far from zero growth and zero inflation. Germany does not have the economic levers to try to solve the problem. It cannot even print money because it does not have any money of its own to print. Germany may well be going in the same direction as Japan.
	One would have thought that the most capitalistic country in the world would benefit enormously from the new global capitalism. It is ironic, however, that the United States is having problems, too. Its growth this year is likely to be lower than 2 per cent. The prices of most manufactured goods in the United States have been falling over the past year. To try to stimulate growth, the Federal Reservean excellent institutionhas had to reduce interest rates 12 times over the past three years. The present federal funds rate is 1.25 per cent., so there is not much room for reducing interest rates. Again, that is getting close to zero interest rates, as in Japan.
	To its credit, I believe that the Federal Reserve recognises the dangers of a slide into general deflation. I have read newspaper reportsI suspect that they are accurateof various attempts by Alan Greenspan to draw up plans if interest rates and their reduction do not create growth in the American economy. There are plans A and B.
	I read that plan A is for the United States Treasury to issue more bills, and for the Federal Reserve to buy them; one agency of government issues Bills and the other agency prints money to buy them.
	Plan B is much more drasticcertainly for the United States. It is that the Federal Reserve would print money to buy shares in the leading Wall street companies. I doubt whether that will happen. However, printing money seems to be the only solution at present, or attempted solution, for global deflation.
	War, and its aftermath, may put some inflation back into the system, which we need, and it may also put growth back into the United States economy. In the short term, the global economy may pick up some growth as a result of the war. That is a result of having to replace all the siege engines that have been lost in Iraq. I suspect that after the short-term consequences have worked through the system, the enormous deflationary pressures caused by global capitalism will revive and, even in the United States, will drive prices and growth closer to zero.
	As we have heard, Britain is in much better shape, thanks to the excellent stewardship of the economy of my right hon. Friend the Chancellor. I remain confident that we shall be able to resist enormous global pressures and maintain the shape of our economy.
	Many in the financial community, including many central bankers, many economists and practitioners and, indeed, some politicians, are still fighting the old war against inflation. I suppose that central bankers cannot do anything else. Once there is deflation they become redundant. Anybody can print money. No one needs to pay a central banker a lot of money to print money. Once inflation goes, we do not need central bankers.
	Apart from the Federal Reserve, there does not seem to be much recognition, at least in publicperhaps there is, but no one wants to admit itthat the danger is deflation. The war against inflation has gone. However, the war against deflation will be more difficult to fight. The weapons that are needed to fight it are obviously quite different from the weapons needed to fight inflation. It is

Mr. Deputy Speaker: Order. The right hon. Gentleman has had his eight minutes.

Matthew Taylor: This year's Budget has been more predictable than most in many ways. The Chancellor was constrained by his financial difficulties from making some of the grand gestures that he sought to make in the past. However, the predictable aspects of the Budget are worth examining, although one aspect was far from predictable.
	The first and most predictable feature of the Budget was that the Chancellor would recite all the economic successes, as he sees them, and not touch on any of the gathering clouds around the economy. Above all, it was predictable that he would contrast growth figures in the British economy with figures for some of the major economies in the European Union. It is true that growth here has been higher, although we have had high levels of consumption. As a result, in the service sectorsespecially the sectors related to the high levels of consumptionwe see employment not only high but rising.
	The problem with the argument that the Chancellor advancesfull of confidencethat all is well in the economy is, as the right hon. Gentleman used to say when he was in opposition, that the best measure of the future strength of an economy is not consumption but investment. If we are not making the investment today, we cannot earn the money for future consumption.
	It is not only that the growth in consumption has been built on past success; the situation is worse than that. Current growth in consumption and the growth in the economy is built not on past success in investment but on borrowing. Above all, it is built on private sector borrowing that has been fuelled by the growth in the value of house prices and massive levels of equity withdrawal. That consumption has been running at levels far beyond the growth in the underlying economy.
	Nobodynot the Bank of England, not independent financial experts and not even the Chancellorbelieves that such consumption fed by growth in house prices and more borrowing at rates above the underlying growth in the economy can continue for ever. We all know that there is a limit to how high house prices can go relative to incomes. We all know also that there is only so much that people can afford to borrow before the cost of borrowing exceeds the ability to pay for it.
	We can all guess when that will happen. A fall in growth in the housing market has been predicted almost continuously over the past couple of years. That has been assumed by the Bank of England, mortgage lenders and the Government. However, without that growth the Chancellor would not be presenting good growth figures for the economy overall in his Budget. The underlying investment figures are worse than those of any of our major economic competitors. They are worse even than those of the economies of France and Germany, with which the Chancellor likes to contrast his record. They are not slightly worse but far worse than the economies of France, Germany, Italy, Japan and America. That raises the question of how far the economy is successful. It tells us one thing clearly: the Chancellor has failed on the measure of success that he set himself when in oppositionthe measure of investment. He has failed not because the overall economic circumstances are badinflation is low, unemployment is lowbut for other reasons. We must look at his policies: the red tape, the tax complications, the grinding down, the difficulties added and the layers of bureaucracy in the business system.
	The record is not only that the Chancellor has failed so far, that the investment has not happened to pay for future consumption and, perhaps most important, the taxes that the Chancellor depends on to make the welcome investment in health and education, but that he makes his figures add up only by assuming that the growth in borrowing, the withdrawal of equity, will continue. Everyone else is predicting that the housing market will at best flatten and may dipwe are already seeing signs of a dip in central London, which most people believe may spread. In the Red Book, the Chancellor is pinning his assumptions in respect of tax revenues to pay for his spending plans and of the growth in the economy on continued growth in equity withdrawal. He may be right, but it is extraordinary, if predictable, optimism.
	There is a second predictable element to the Budget. The Budget is not neutral on the issue of red tape and tax complicationfar from it, it adds to tax complication and to red tape. It was predictable because the Chancellor sincerely believes that that is the best way to manage the economy. One does not have to read many of his Budget statements to realise that that is a fundamental themestable macro policy but targeted micro policy, and by targeted he means the Government trying to guess the winners. There is a tax credit here, a tax break there, a bit of scope here, a bit of spending here, there and everywhere.
	It is typified by the tax break to promote the British film industry, which was supposedly targeted on encouraging the production of more films in the UK. That lasted only a couple of years, because it did not encourage the production of great movies in this country. It encouraged the production of movies deliberately designed to lose money. They were never released for the British public to see. Worse than that, it was yet another tax loophole. Small businesses, the directors and the producers who have great ideas for new British movies, did not make use of it. The people who made use of it were the big production companies and big TV companies. Suddenly, we saw the reclassification of soap operas as films. Film production went through the roof. Nothing changed in the real world. The Government spent a lot of money. It was entirely wasted and then they withdrew the tax break.
	In every single Budget so far, the Chancellor has added to the red tape and those tax complications and to the employment of tax accountants but done nothing to help businesses at the small end: people who cannot afford to pay for expensive tax advice, who work every hour of every day to try to make their businesses a success and who find themselves having to wade through ever more tax documents, complications, credit forms, allowances and all the rest of the paraphernalia of a Chancellor who believes in such micro-management. I do not believe that it works and, looking at the investment figures, the evidence is that it does not work.
	The third predictable element of the Budget was a lack of action on fairness in the tax system. We know what the reason is. We know why it is that, on the latest figures released on Fridayofficial Government figuresthe poorest fifth of households pay 41.7 per cent. of their incomes in tax whereas the richest fifth of households pay 34.2 per cent. of their incomes in tax. It is not a progressive tax system but a regressive tax system. Tax breaks are given to those who can afford to employ tax accountants to find them, but those on lower incomes are hit by a tax system that has been wound up to their cost.
	Why is that? I am sure that it is not what the Chancellor intended. He did not come into politics to achieve a tax system of that sort, with less tax for those who are wealthy and more tax for those who are poor. It comes down to the promise made in 1997 that there would be no changes in income tax, although there was one change, of course, which made it worse: he cut income tax by 1 per cent. before the general election. He increased it indirectly by increasing national insurance afterwards. He forgot to mention that in the general election campaign. Instead, he used indirect taxes, the so-called stealth taxesevery little way that he could to add some money that would not hit the income tax headlines.
	All those little changes, each and every one, little by little across the tax system, the breaks here, the additions there, the indirect tax increases, the cuts and new allowances for those wealthy enough to find their way through the system, added to the injustice of the tax system. They made it worse and meant that the poor paid even more while the rich paid even less.
	The Chancellor did not mention at all the biggest and most regressive tax change, but we all know that it is happening. It is strange that he missed it because I am sure that his constituents are writing about it as much as those anywhere else in the country. It is the stealth tax rise taking place in every council chamber across the country, the council tax increases forced on councils by the Chancellor's decision, while increasing the burdens on councilsnationally agreed pay rises, pension requirements, new requirements on services, all of which are perfectly valid in their own rightnot to fund adequately through the Government grant system the amounts needed to meet those Government-decided requirements. Why did the Chancellor do that? He did so because it meant that he did not need to announce the 2 billion increase in council tax this year. He could transfer the blame to councils.
	The Chancellor does not mind if they are Labour councils. The truth is that Conservative, Liberal Democrat and Labour councils are all sharing the burden and the pain. One can find examples across the country. The average increase in council tax this year is four times inflation.
	People ask, Where is this money going? How is it that council tax is rising? Where is the improvement? In many cases, there are no improvements. In fact, many councils are having to cut services at the same time as increasing council tax. That has been forced on those councils by the grant.
	I am not saying that councils are perfect. I am sure that there are examples across the board of councils perhaps making wrong decisions. I could easily list some Labour and Conservative councils that have done so. I am sure that some Liberal Democrat councils would be fired back at me butwe all know this because we represent areas run by our own parties; it is happening across the boardthe Chancellor has taken a 2 billion stealth tax grab through the council tax and hoped that someone else would get the blame.

Alex Salmond: I will resist the temptation to cite Aberdeenshire to the hon. Gentleman, but are we not reaching a position where the council tax, because it is being asked to bear a burden that it was never designed to bear, is becoming almost as regressive as the poll tax that it replaced?

Matthew Taylor: The hon. Gentleman is right. The criticism that I make is not restricted to this Government. The problem is particularly bad this year because the Government were particularly short of money, so they had to hit councils, but both Conservative and Labour Governments have performed the trick since the council tax was introduced. Council tax replaced the poll tax. As we all remember, VAT went up in order to increase the grant and keep council tax down to a level that would not lead to public protest but, ever since, year by year, Governments have been unburdening themselves of the costs of those services, pushing them on to the councils and pushing up the council tax.
	There is a fundamental problem with the council tax: it is not related to ability to pay. It may be easy for a Chancellor on 140,000 a year to pay his council tax bill but it is very hard for people in areas such as the one that I representaverage income is 15,000 or 16,000 a year for a full-time male employee in my constituencyto find about 1,000 to pay the council tax bill, and it gets worse year by year. We know just how hefty the burden is, because the new figures that the Government released on Friday show us the result of this process. On average, after benefits the poorest fifth of households pay 7.1 per cent. of income in local taxes, compared with the richest fifth, who pay just 1.8 per cent.
	That is why Liberal Democrats have argued that something has to be done nationally. We argued that we should have a 50 per cent. rate of tax on those lucky enough to earn more than 100,000 a year, which is in line with European levels, and even with New York levels, for top-rate taxpayers. That would provide sufficient funding to cut the council tax immediately by 100, and to get rid of the iniquitous tuition and top-up fees that are hitting the many ordinary families supporting students through university. Moreover, at a stroke it would to some degree rebalance the tax system, making it a little less regressive for the poor by asking the rich to pay just a little more.

Tom Harris: Will the hon. Gentleman clarify the effects of this policy? In addition to higher earners paying 50 per cent. tax, would not everyone else pay extra income tax, given that the Liberal Democrat policy is to get rid of the council tax and replace it with a local income tax? Would not the burden be increased, therefore, far beyond just 50 per cent.?

Matthew Taylor: In the first instance, we would ask not current top-rate earners but only those on more than 100,000 a year to make that contribution. That measure could be introduced very quickly; indeed, the Chancellor could have introduced it this week. In the longer run, what the hon. Gentleman says is right. We believe that the council tax is not a sustainable way to fund local government expenditure for the very reason that I have given. Yes, we would replace it with a system based on ability to pay: a local income tax that is collected through the existing Inland Revenue structure, involving less than 3 per cent. on income tax, in order to get rid of the council tax. I should remind the hon. Gentleman of the figures. The poorest 20 per cent. of the population currently pay 7.1 per cent. of income in local taxesthere would be a huge tax cut for themyet the richest fifth pay 1.8 per cent.
	Such rebalancing of the tax system would be right and fair. [Interruption.] I do not expect the Conservatives to believe me, because they do not believe in progressive taxation. I urge Labour Members to think hard about this issue. The alternative is further squeezes on council expenditure and services, and, worst of all, the probability of further yearly above-inflation increases in council tax. This Government have simply followed the previous one down this path. It is always easier for Governments to get councils to take the blame for council tax increases. People on low incomespensioners on fixed incomes and many othersare finding it impossible to pay these bills, at more than 1,000 per household, on average, for a band D property. This has gone from a protest of hurt to a real cry of pain, and the policy should not continue.

Jim Cunningham: Some years ago, before the poll tax, the abolition of the old rating systemin Coventry, for exampleresulted in the loss of some 600 million over a number of years. What are the hon. Gentleman's views on that, and would local government be funded solely through his proposed local taxation, or would he retain a measure of Government granthe has not touched on that so farfor social services, education and so on? How would he compensate for that?

Matthew Taylor: The replacement system for the council tax would require only a fairly low level of income taxon all income, incidentally, right across the bandsbut the question of Government grant must be addressed in two respects. It is obviously necessary to maintain a system of Government grant to equalise differing income levels in different districts. The principle should be a similar level of income tax to pay for a similar level of service, so there is no getting away from generating fairness and equality across the country through Government grant. But the key difference between council tax and local income tax is that one could, if one wished, increase the proportion raised locally simply by reducing national income tax and increasing local income tax, penny for penny. However, there is no getting away from the fact that an equalisation system would be necessary, and no one in his right mind would argue otherwise.

Michael Howard: Will the hon. Gentleman confirm that he would need 6p on income tax to compensate for the money that he would otherwise take through the council tax? On his short-term proposal, will he confirm that, since Liberal Democrat councils already charge, on average, 100 more in council tax than Conservative ones, the only effect of his introducing a 50 per cent. rate on income tax would be to bring Liberal Democrat councils' taxes to roughly the existing levels of Conservative ones?

Matthew Taylor: The right hon. and learned Gentleman is wrong, and he should check the Government figures. First, in fact, on average Liberal Democrat councils charge less than Conservative ones[Interruption.] Oh, yes. The general public can rely on the official figures; they do not have to rely on the Conservatives' figures. His second point is also wrong. I am aware that the Conservatives have been peddling this figure. They assume that it applies only to the basic rate, which is wrong; worst of all, they forgot to take off the council tax benefit. So the proposal would cost nothing like the figure that he mentions. Perhaps he needs to get a new economic researcher, as this is a fairly basic matter to check on.
	Of course, we know two things about the right hon. and learned Gentleman and tax for councils. He and I participated in a Committee some time ago, in which I argued for exactly the proposition that I have just advanced; however, he argued for the poll tax. He was representing the then Government and proposing the poll tax, so we know that he is not in favour of a fair system of local tax. He thinks that, regardless of how much people earn, they should pay exactly the same. He wants a big cut in his bill to pay for the councila cut paid for by all of those on low incomes. An apology might be the right thing for him to intervene with now; perhaps he would like to apologise for introducing the poll tax, having arguing for it in Committee.
	If the right hon. and learned Gentleman does not feel like doing that, perhaps he could tell us what he would do about the council tax. When asked last week by The Daily Telegraph what he would do about rising council tax bills, what did he have to say? Did he speak of a programme of change, of a new policy, of an initiative? No. All that he could say was, I don't know. The full and thought-through Conservative party policy on the council tax, as expressed by the shadow Chancellor in the paper of that party, was, I don't know. Well, Liberal Democrats do know. We have had a thought-through policy for some time, and the right hon. and learned Gentleman should surely have been able to catch up with us by now.
	The final point that I want to touch on

Nicholas Soames: Bloody hell!

Matthew Taylor: Thank you. The Budget contained one unpredictable element that I was really surprised by: the Chancellor's decision, having thrown out prudence and dallied with lady bountiful, to hit the casinosthe gambler Chancellor. Underlying all of these policies are two assumptions that simply cannot be justified, but which underpin his spending programme for future years. He had a choice. His Budget need not have frozen some of the allowances, and he could have brought in a little extra in the way of finances. Most of all, he could have been honest and said not only that borrowing will be higher than he predicted for next year, but that it is likely to continue to rise for some time. We could then have argued about that.
	Had the Chancellor taken that approach, his growth forecasts could have matched those of independent forecasters; instead, he chose to take a flyer. He chose to base his entire economic plan for the next few years on the assumption that growth in 2004 will bounce back way beyond the consensus of independent forecasters. He forecasts not the average 2.4 per cent. growth for 2004 predicted by independent forecasters; nor is he just a little on the high side of that figure at 2.5 to 3 per cent. He forecasts growth of a full 3 to 3.5 per cent. in just a year's time, despite the fact that forecasters predict that business investment will drop again next year.
	We are talking about a bounce back coming from nowhere, funded by nothing, with no investment to pay for it. The Chancellor believes in that, and he may be right: perhaps the response to the war in Iraq will be a huge runaway success in the American economy, driving worldwide success and driving up the British economy, despite the fall in business investment in the United Kingdom. To describe that as prudent, howeverwell, not even the Chancellor could bring himself to do it.
	The fact is that the Chancellor has taken a flyer. He has taken a gamble, and I do not think it was predictable. I think it was extraordinary. The chances are that he will have to come back in the autumn, or at the time of next year's Budget, and admit that he has got it wrong again and must downgrade his figures yet another time. Why did he do this? It is almost impossible to understand.
	I am not talking only about the growth figures. In a couple of years, corporation tax receipts will be at record levels. They will not be at their present 2.3 per cent. level, or at the 2.9 per cent. historic average. A rate of 3.3 per cent. from the economy as a whole will be paid in corporation tax. How often has that been achieved? It happened in only one year, in the late 1990s, at the top of the stock market boom. For some reason, however, the Chancellor believes in low business investment along with record corporation tax levels.
	If the Chancellor does not achieve his aim, he will have to cut spending or elsemore likelycome back in a year or two and ask for more tax. This time it will not be to fund investment in education and health, but to fund a gap caused by his mistakes, which have led to low investment in business. That has meant an economy that has not earned the money to pay for the Chancellor's plans for health and education.
	We welcomed those plans. We stood by them, and argued for the necessary increases. Next time, however, it will be not a tax for health and education, but a tax for Brown's error. Why did he do that unpredictable thing? Why did he take a gamble? I do not know. Perhaps we shall never find out; or perhaps the Chancellor has no intention of being in office when the time comes to pay his bills.

Bill Etherington: Because of the two important and encouraging statements and the ten-minute Bill that preceded this debate, according to my calculations only 11 Labour Members will be able to speak. I am extremely grateful for my chance to do so.
	I congratulate the Chancellor. As in earlier years, he has produced an excellent Budget. Year after year we have heard the same complaints from businesses, well expounded by their handmaidens on the Opposition Front Bench. Year after year they have been wrong, and I am sure that they will be wrong this time.
	I am pleased that there has been no reduction in public expenditure. Again, time after time the Opposition have criticised all our services and the way in which things are run; but whenever efforts are made to improve the situation, the same people object to the provision of money for the purpose. I am sure that the public are beginning to realise that, because they are becoming extremely stale.
	In the early years of the Chancellor's reign, he brought about a significant reduction in the national debt, which allowed more public expenditure without the need for increased taxes. Probably his greatest asset is his talent for obtaining revenue. If I needed to raise money quickly, as I hope I never shall, the first person I would go to would be the Chancellor. He has performed miraculously in obtaining money and making it available for investment in infrastructure, and in making a better life for people.
	Many Opposition Members are grinning. The public will tell them that the last six years have been the best in the past 25 for the vast majority of people: there is no denying that.
	I hope no one will assume that because I am sometimes a little critical of what business organisations say, I am against business. I am not. I understand enough about economics to realise that the only way in which wealth can be produced is through various types of businesslarge, medium-sized and small. When I talk to those running small and, often, larger businesses, they are not as critical of the Chancellor or the Government as Opposition Members. I say that in all sincerity, and I meet quite a few businessmen.
	What does concern me is the possibility that my right hon. Friend is rapidly running out of options for what are sometimes called stealth taxes. I think that stealth taxes have been marvellous. They are one of the best things that have ever happened in this country, and they have led to much better lives for the citizens whom we are supposed to represent. Let me point out to the Opposition that we are supposed to represent everyone, not just businesses.
	Although it emanated from my own party, one of the most rubbishy sayings I ever heard was If it is good for business, it must be good for Britain. That is not necessarily true. It is true to a large extent, but sometimes things that are good for business are bad for the rest of society. It must never be forgotten that businesses are only a small part of society, albeit an important part. I make that point because I do not want to be accused of being anti-business just because I have spoken the truth.
	If we want to go on improving life in this country, we must eventually revisit the whole issue of personal taxation. My view, and that of the Government, is that the fairest form of taxation always has been, and always will be, progressive personal taxation. Those who make the most from society must be required to put the most back into it. It is an old-fashioned concept: it is called socialism. I believe in it, I do not believe that it is out of date, and I believe that its time will come again.
	In the future, my party may well have to revisit that issue. We shall have to explain to the public that whatever they want must be paid forand, in the long term, the only way of paying for a decent infrastructure and decent services is obtaining the necessary revenue through tax. We do not need to be John Maynard Keynes to realise thata fairly elementary knowledge of economics makes it obviousyet time after time there is opposition to any increase in public expenditure from the same people who demand better services.

David Burnside: Will the hon. Gentleman give way?

Bill Etherington: I am sorry, but I am not giving way to anyone. I mean no disrespect. I have only eight minutes in which to speak.
	Although the NHS, for instance, has received a tremendous amount of extra resources, it is felt that nothing is being received as a result. France, I believe, provides a slightly better health service than ours with approximately half the number of staff serving a similar population. It is not a simple matter: the United States, which spends almost twice as much GDP as us on health, does not provide a better service.
	Earlier, an Opposition Member mentioned pensions. Some Opposition Members should be ashamed. The architecture of the current problems in private pensions was Conservative party legislation that tried to denude good occupational pension schemes and put them into the insurance sector. We have never recovered from that. As a consequence, various companies decided to take contributions holidays. When I hear of so-called raids on pension funds, I wonder how much has been lost from those funds by employers and companies giving themselves such holidays. Yes, there is a shortfall, but it would have been a lot less if so much had not been taken from pension schemesimmorally in my view, although, unfortunately, legally.
	I happened to be reading The Daily Telegraph on the way here today. I am sure that the Opposition appreciate that it is not a paper that generally goes out of its way to praise Labourindeed, I think no one would deny thatand it was interesting to find on page 33, along with the usual bellyaching and moaning from business about the Budget, a little article tucked away with the headline British venture capital tops EU league. It reports
	The European Venture Capital Association . . . has produced a league table on where it thinks the venture capital environment is most favourable. Britain emerges as the best.
	So I do not know why we need all the doom and gloom. It continues:
	Britain emerges well on tax because capital gains tax is scored at 10 per cent. against the EU average of 18.6 per cent . . . The UK also has a small business corporation tax rate
	Nobody has mentioned that tonight. It goes on:
	Britain scores well for its entrepreneurial environment because it is cheap and easy to set up a company.
	From what we have heard from Conservative Members tonight, it would seem as if it were almost impossible to set up a company in this country. It is about time that we heard rather more forthrightness and honesty from the Conservative Benches.

Gillian Shephard: The hon. Member for Sunderland, North (Mr. Etherington) could never be accused of not being straightforward. It is a delight to follow him and his straightforward expression of the ideas of old Labour. I would also like to congratulate my hon. Friend the Member for South Suffolk (Mr. Yeo), who opened the debate for the Conservatives, on his successful exposure of this hope-for-the-best Budget, not to mention the Panglossian statements of the Secretary of State for Trade and Industry.
	I wish to devote my remarks to one particular, and particularly disappointing, aspect of the Budget. If the Chancellor had chosen, as he could have done, to make a convincing reduction in duty on biofuelsinstead of re-announcing his pre-Budget report figure of 20p per litre as if it were newhe could have moved closer to his own Government's environmental targets. He could have tackled the issue of fuel security, which he has himself described as of increasing concern. He could have given a much-needed boost to the decline in manufacturing, about which we have heard much from the Secretary of State this afternoon. Most importantly of all for my constituents, he could have given real hope to the future of the agriculture sector, which has endured a 50 per cent. reduction in its incomes over the past year alone under the present Government.
	Ministers will know from early-day motions, from speeches in the House, from meetings with hon. Members and from the fact that the Select Committee on the Environment, Food and Rural Affairs is to examine the future of biofuels, about the strength of the all-party support for a further reduction in biofuel duty. Indeed, I see some supporters on the Government Benches. Sadly, it is not clear that any one Department is crusading for that causecertainly not the Treasury. That is strange, given the obvious contribution that a reduction in biofuel duty would make to the Government's oft-repeated commitment to the reduction of greenhouse gas emissions and carbon dioxide emissions. A reduction would also contribute to meeting the target for renewables by 2020. Given that road fuel emissions constitute 25 per cent. of the total requirement, I wonder how the Government think that they will realise their objectives without including biofuel measures. I do not believe that they can.
	The rest of us are aware of the many other advantages of biofuels, even if the Treasury is not. The public want access to environmentally friendly fuels without the expense of having to switch to hybrid vehicles or those that have to be adapted. Biofuel duty reduction is supported not only by Members of all parties, but by organisations as diverse as Friends of the Earth, the National Farmers Union, the Country Land and Business Association and several major industries.
	Independent research by Sheffield Hallam university demonstrated that CO2 emission reductions from conventionally produced bioethanol would be more than 60 per cent., whereas British Sugar believes that, with the efficient generators in its factories, the figure could be increased to more than 70 per cent. Whatever the precise level of emission reduction, it is clear that a 20p duty reduction is not enough to encourage investment in biofuel production without the security of knowing that there will be a sustainable market for bioethanol. Without that, there will be no investment by British Sugar or any other manufacturer to produce the fuel. Meanwhile, other countries have got the message. Brazil has a minimum mandatory 25 per cent. bioethanol blend in all gasoline fuels and in the US 12 per cent. of cars are powered by biofuel blends. The Government also have to face the demands of the EU biofuels directives.
	Encouragement for greater use of biofuels would help manufacturing, especially in rural areas, about which the Secretary of State seemed so enthusiastic this afternoon. It would help the Government to achieve their environmental targets and would contribute to fuel security, but for rural economies it could make a life-or-death difference. As the Government's policy commission on the future of food and farming states,
	England needs a long-term strategy for creating and exploiting opportunities in non-food crops including starch and oils. This area should be a high priority for the research and technology transfers we have outlined. We recommend that the Government should reduce duty on bio-fuels to that charged on other clean fuels. We believe that this will help processors to drive the market forward.
	What a carbon copy of the examples provided by the Secretary of State this afternoon: the only difference is that this one is real and the Government are doing nothing about it.
	The House will need no reminding of the current plight of agriculture. In East Anglia, the staple crop of sugar beet faces becoming, in effect, a non-food crop by 2006. In Norfolk alone, 10,000 jobs depend on sugar beet. If farming is to continue, the Government must provide more adequate encouragement for the alternative use of food crops. It is worth noting that production of sugar beet or cereals for bioethanol would fall completely outside the current common agricultural policy support system. Sugar beet production has an excellent environmental record and the majority of cereal feedstock would be drawn from the current UK surplus. Both crops would be grown extensively, not intensively. British Sugar has said that it would take only 22 months to convert its existing plants to produce biofuels from cereal and sugar beet, but it will not contemplate doing so without an assured market. That can only be brought about by a more realistic duty reduction.
	The Treasury has to balance its books, as we will be told later, by setting an increased biofuel duty reduction against the benefits to the economy that would result. In this Budget it may have had to do that because of its own forecasting and economic mistakes, but what is being done across government to establish the case? What is DEFRA doing to press the case? How is it that the only research being conducted across government is being undertaken by the East of England Development Agency and how does that vacuum of research, evidence and Government resolve square with the boasts of the Secretary of State earlier?
	I submit that if the Government had been serious about meeting their environmental commitments, about fuel security and, above all, about the future of manufacturing, agriculture and the countryside, they would not have left that vital work to a development agency but done it themselvesacross Departments and in time for this Budget, not the next. Members of all parties must ensure that next time the Government heed their own words, work toward meeting their commitments and give some assurance about the future to people in agriculture and rural communities, which they sorely need.

Barry Sheerman: Most people outside the Chamber think well of us when they hear such excellent speeches as those of the right hon. Member for South-West Norfolk (Mrs. Shephard), my right hon. Friend the Member for Llanelli (Denzil Davies) and my hon. Friend the Member for Sunderland, North (Mr. Etherington), in only eight minutes each. The usual political guff from the Front Bench of the Liberal Democrats took three times that time, but will doubtless be widely reported in Focus up and down the country.
	The fact remains that it is difficult to say much in eight minutes and there is a temptation to take things for granted in Budget debates. We certainly need a reality check when we hear some of the critics of the present Budget proposals. I have been a Member of Parliament for some time and I cannot remember experiencing six consecutive good years, in which the economy got better year after year. On all dimensions and in respect of all the criteria, we now have a good economy, but I recall our dire economic experiences under the Thatcher and Major Governments.
	Of course, what was interesting about those days was that by the time we had got used to one disaster under one Chancellor, he had moved on. There was no consistency. At least we have had the same Chancellor from the beginning, and we know his record. He is still there, and he is still defending policies that work.
	That was the party political bit of my speech; now, I want to pick a few holes. First, I agree with the right hon. Member for South-West Norfolk about environmental taxation. She was absolutely right in what she said about biofuels, in which she and I are interested. Anyone who reads the recent report of the Environmental Audit Committee will see the absolute mess that environmental taxation is in under the present Government. They got rid of the landfill tax credit scheme, making a pretence of consulting after the pre-Budget report. After listening to all the leading-edge people in the environmental sector, they still stuck to the crazy proposal to abolish the landfill tax credit scheme, which was such a good piece of environmental taxation. The Government rightly stand condemned for showing no consistency in their environmental tax proposals. That is true across the piecefor biofuels and landfill tax. The landfill tax will go up too slowly to make any difference to the enormous problems of waste in our country.
	I make that point briefly because I mean to speak mainly on productivity, making two strong points. If we track the past six Budgets forensically, we see that the Chancellor's interest, for which he deserves credit, has continued to be focused on the worrying failure of our economy to increase productivity sufficiently in comparison with our competitors. The Chancellor referred last week to an improved position vis--vis Germany and Japan, but we remain behind Germany and substantially behind France. We are appallingly far behind the Americans20 to 30 per cent. behind. What is strange is that when American companies invest in the UK, they bring their productivity rates with them. Being behind has to do not only with the nature of our country and the economic and tax environment. It is not even to do only with the skills in our society. Something strange is going on when an American company can bring such productivity levels in with it.
	There are serious worries about private sector productivity. The Government have produced a range of measures to tackle those concerns. Some of them must be recognised and applauded, but so many seem to be littered across the economic landscape that there is little focus on grasping the productivity problem. The Secretary of State referred when she opened the debate to good liaison between the Treasury and the Department of Trade and Industry and between those two Departments and the Department for Education and Skills. As Chairman of the Select Committee on Education and Skills, I believe that problems with productivity are often linked to the skills base of our country. Many countries resemble ours; we have pretty good educational skills training for about two thirds of the population, but we have a long tail of underachievement, and we have not tackled that problem sufficiently.
	There is a real problem when it comes to tackling productivity in the private sector, but the problem is even greater in the public sector. Some of my colleagues will not like what I am about to say, but I believe that the Prime Minister has always been spot on in saying that investment in public servicesin health, education, the criminal justice system, and transportmust be paid for by reform, improvement and change. There are not enough signs at present that we are obtaining enough change in the public sector to justify our massive investment of taxpayers' money.

Ashok Kumar: We have done that.

Barry Sheerman: I know that that will not be popular with some of my colleagues, but we cannot continue to spend large sums of our national treasure on health, education, transport and criminal justice year on year without a guarantee of radical reform and higher productivity. It is not easy to obtain productivity increases in those sectors, and it is not comfortable.

Ashok Kumar: We are doing it.

Barry Sheerman: Sometimes the Government have to introduce policies such as foundation hospitals because one way to tackle productivity issues is to give people in hospitals that can achieve improvements a lead that will let them make productivity work. My hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) may disagree from a sedentary position: I have only eight minutes, so we cannot have a debate on the point. The fact is that when we invest in education and skills or any other public sector area, we have to find a method of driving up productivity so that taxpayers receive a real return on their investment.
	That point hangs over the Budget, but it is not the dominant point. As Chairman of the Education and Skills Committee, I believe that the real attention paid to the fundamental skills base of this country has begun to work, but there is a long way to go.

Peter Lilley: It is a pleasure to follow the hon. Member for Huddersfield (Mr. Sheerman), who made a bold and outspoken speech in which he referred to the bewildering array of measures that, to use his word, litter the Chancellor's Budgets. It is always hard to tell the significance of those measures until afterwards, when most of them turn out to have been far less significant than one had thought.
	I shall focus on one strand of policy that has flowed through several of the Chancellor's Budgets, including the current one. I believe that it has had the major impact on the real economy, on our society and on social justice. It is far more significant than people realise. It is the policy that the Government have pursued of encouraging substantial net immigration into this country to boost our labour force. That is of enormous importance, but it brings far less economic benefit than the Chancellor argues, and it has social consequences that he has not taken into account, including the impact on the housing market, which is another area dealt with in the Budget, and on the fate of the developing countries, to which I shall refer if time permits.
	We have seen the Government boost the flow of net immigration into this country by the order of 200,000 people each year. They have done that not just, as people imagine, through the growth in asylum seeking, or through the family reunion programme, which they have boosted. Above all, they have done it through the increase in work permits from 47,000 a year to 140,000 a year. Prior to the Budget, they announced plans to boost that figure to 200,000 a year. In the Budget, the Chancellor emphasised further measures, saying that they were geared towards highly skilled immigrants. He referred to the highly skilled migrants' scheme, but that affects something of the order of 1,300 people a year. It is small beer in comparison with the major changes announced by the Chancellor that affect lower-skilled workers. He referred to two programmesnot in his speech, but in the Budget documentbringing 10,000 extra workers each for the hospitality sector and the food processing sector. Another 5,000 workers will be on seasonal work programmes, although, paradoxically, the seasonal work programme will happen all year round. The Chancellor proposes to promote the holiday workers scheme, which allowed 40,000 people a year to come primarily from the old dominions in the rest of the Commonwealthin India, Africa and so on. He is also to promote a similar scheme for the new European countries that will in due course become members of the European Union. Substantial numbers will be added to the net inflow as a result of the measures that were announced in the Budget.
	I am not against all migration; I believe that it can have benefits. Still less am I against all immigrantseven those who come here as economic migrants pretending to be asylum seekers are, in my view, decent, honourable people who are exploiting an opportunity that we have opened to them and who want to better their lot and that of their families. We should spurn those who try to denigrate them as individuals. However, the country should surely seek balanced migration, with the flows into the country roughly equal to the flows out of the country. Roughly 400,000 people a year leave for temporary assignments overseas; a similar number coming in would do us much good.

Alex Salmond: It is generally acknowledged that net immigration has been one of the driving forces behind the growth of the American economy, especially through the second generation of immigrants. Why should it be any different for the UK economy?

Peter Lilley: I want to talk about precisely that point because the Chancellor raised it too. The Chancellor claimed that net immigration has economic and social benefits that have been important to the success of the US economy and are now important to ours. Is that true? It is certainly true that, if one has extra workers, one has extra output. However, there is no evidence that those extra workers increase the productivity or the rate of growth of the pre-existing workers. Adair Turner recently analysed the difference in productivity growth and economic growth in Europe and America. At first sight, American growth over the past 20-odd years is half as great again as European growth. However, when the figures are broken down, they show that per-head growth in the States has been almost identical to that in Europe. In other words, all that migration has achieved in America has been to add to the size of the economy but not to the average wealth per head.
	What of the social benefits to which the Chancellor referred? Clearly, cheap labour benefits the rich. Many people whom I have met around London say that they enjoy employing cheap workers who have come from eastern Europe or elsewhere. However, by definition, it benefits them by holding down the pay of lower and less skilled working groups. I am not the only one who says that. The Government's adviser on labour matters, the noble Lord Layard, wrote to the Financial Times to say that, according to the newspaper, we needed immigrants, skilled and unskilled.
	However, his letter continued:
	This may now be the conventional wisdom, but it glosses over the conflicts of interest between different groups
	of people.
	For . . . employers and skilled workers, unskilled immigration brings real advantages. It provides labour for their restaurants, building sites and car parks and helps to keep these services cheap by keeping down the wages of those who work there.
	But for unskilled
	people
	it is a mixed blessing. It depresses their wages and may affect their job opportunities. Already unskilled workers are four times more likely to be unemployed than skilled workers, and it is not surprising that they worry.
	Although the total size of the labour force has no effect on the unemployment rate, its structure does; and a rise in the proportion of workers who are unskilled does raise overall unemployment.
	The social benefits of unlimited immigrationor, not unlimited, but boosted net immigrationare not so visible to those at the lower end of the pay spectrum. The reason why nurses in this country are paid relatively little, and less than secretaries, is that we recruit nearly 30,000 nurses from abroad every year, enabling us to hold down their pay. That is why a third of all those who train as nurses leave the profession. That is why there are 100,000 people in this country with nursing skills who do not take up nursing jobs. The story is similar in a number of other professions.
	The major social cost of this immigration policy is surely in the housing market. In an empty country, it is sensible to promote net immigration to exploit natural resources. However, England is the most overcrowded country in Europe; it is more densely populated even than Belgium and three times more densely populated than France. Net immigration into this country imposes social costs and leads to competition for scarce resources, especially in housing and land. The Chancellor deplores that. In his Budget, he deplores high prices and the scarcity of supply of housing. He proposes to relax the planning laws. However, he does not say how many extra houses that will create. I would ask the Chancellor to tell us, when he sums up, whether the measures that he announced in the Budget for extra houses will be sufficient to cope with and house even the extra flow of labour into this country, which he is encouraging, let alone the net immigration of 200,000 people a year into this country. That was the predicted figure before this Budget. It is equivalent to two whole constituencies' worth of houses having to be built every yeartwo thirds of them in the south-east. That target cannot easily be met. We have made a problem for ourselves by promoting excessive net immigration to this country. I hope that the Government will think again about the wisdom of that policy.

Iain Luke: It is a privilege to speak after the right hon. Member for Hitchin and Harpenden (Mr. Lilley). I congratulate him on his studied approach to the Budget proposals. However, if there were a problem of overcrowding in England, I would welcome proposals from the Chancellor to move civil servants out of London and into my area of Scotland. We have plenty of space and we would welcome the economic benefits.
	When this Government came to power in 1997, their arrival was heralded by the anthem, Things can only get better. That is exactly what has happened. The Conservative party may not like it, but in every subsequent yearincrementally, bit by bitthings have got better. Over the six years, the Government's economic policies have created stability and built a fiscal framework that has allowed Britain, and Scotland within it, to get as close as they have been to full employment since 1974. There are more people in work now than there have been for the past 30 years. The Government's policies have promoted growth year in, year out. The hon. Member for Banff and Buchan (Mr. Salmond) may want to pick me up on that comment, and say that, technically, Scotland was in recession for two months last year. However, there have been heartening increases in the growth in services, house prices and tourism. I am happy to give way on that prompt.

Alex Salmond: Since Labour's most recent First Minister took office in Scotland 18 months ago, the Scottish economy has contracted to the extent of 260 million in gross domestic product. Not everything in the Scottish garden is rosy, not even in Dundee.

Iain Luke: I accept that point and will address it later in my speech. However, the hon. Gentleman's party's policy would create even further chaos. He believes in divorce from the United Kingdom. That would lead ultimately to job losses and an outward flow of investment.
	The nature of this Budget is to consolidate the progress that we have made so far and to continue to foster, throughout Britain, economic strength and social justice. I welcome the Chancellor's commitment to encourage and help to harness the distinctive strengths of the nations and regions of this country, assisting them to rise to the challenge of making their skills, innovations and enterprise world class. There is a series of structural problems that Parliament will have to address, in conjunction with the Scottish Executive, to ensure that Scotland enjoys and shares in that wealth. One issue that the Chancellor should take up with his opposite number in the Scottish Parliament is that of doing away with Scottish Enterprise, and putting in place a much better and more interventive means of implementing Government policysuch as we had in the days of the old Scottish Development Agency, which could take an issue in its hands and resolve it. We also have to create cross-border institutions between this Parliament and the Holyrood Parliament, so that we can discuss structural issues and find ways to resolve them.
	Hon. Members should rest assured that Scotland and Dundee are ready to play their part in creating a world-class innovative economy in the UK. As I have said, in Scotland things are getting better. However, I fully accept that things have yet to be done to ensure that Scotland, Dundee and all parts of the UK share in the general prosperity that is enjoyed in other, more affluent, areas of the country.
	There has been much comment to the effect that this Budget introduces a series of standstill measures. Nothing could be further from the truth. In this Budget, the money to finance innovations in education, science and enterprise is measured to ensure that we are spending enough to ensure that the growth that we have created so far is maintained and improved on. It will expand our skills base and, as a result, increase our productivity and competitiveness. In that context, I welcome both the extra 3 billion being invested in the sciences and activity to aid research and the pioneering of new technology. Allowing Britain to lead the world in new discoveries means that we create new industries and new jobs.
	It is also right that we should do much more to encourage universities to assist in that processa cause that is close to the heart of my right hon. Friend the Secretary of State for Trade and Industry, and one of which I am well aware, given the crucial roles in the regeneration of Dundee and Tayside played by the two universities in my city.The university of Dundee leads the way in medical biotechnological research, an area referred to by my right hon. Friend in her introduction, and is tipped as the university most likely to discover the underlying causes of cancer. It is already a world beater in promoting cures and treatments to counter that illness.
	The university of Abertay, Dundee, has also played a significant role in the regeneration of my city's economy by attracting so many students to its unique IT-based courses. The university is an acknowledged leader in the field of computer games technology and has played a prominent role in several DTI-sponsored visits to the far east and Japan.
	Those two universities are a microcosm of the UK academic scene and show what can be done, and what potential there is, when academic research can be linked to the creation of new products, the promotion of industrial development and aiding urban and economic regeneration. As a Government, we need to ensure that all UK higher education establishments committed to research are funded fully and fairly. We should do away with the golden triangle of selective and prestigious universities that dominate researcha point made earlier in the debate and also by the principal of Abertay university when I spoke to him on Friday. Every academic institution should be committed to research and to the promotion of that research for the benefit of all.
	Research into oil and gas extraction techniques would be of enormous benefit to Britain, and to Scotland, especially in the technically difficult and demanding North sea oilfields. Recently, Professor Kemp delivered a talk in the Palace on the extent of the life of North sea oil and gas. In response to a question from me, he openly admitted that not enough was being spent on promoting innovation to tackle the problems. He made the point, which was fully accepted by all who attended the meeting, that, as well as changing the price ratios, the life of those North sea fuels could be extended by ensuring that more was spent on innovation. I hope that the DTI Minister with responsibility for those matters will attend a meeting of the United Kingdom Offshore Operators Association all-party group to talk about the Government's proposals on such matters.
	We need to do more for small businesses. I am a member of the all-party group on small businesses and recently initiated a debate on the contribution of UK small businesses to our economy. The Opposition show a lack of knowledge of the situation for small businesses, as we saw when the hon. Member for South Suffolk (Mr. Yeo), who opened the debate for the Opposition, skirted and avoided my question to him.
	Last year, despite the downturn in the global economy, there was an increase of 14 per cent. in the number of small businesses created. That growth was shared north of the border, although not to the same extent. It is easier to create a small business in the UK than in Europe, and takes less time, because there is less regulation.
	I liaise closely with the Federation of Small Businesses in Scotland. Last year, the federation conducted a survey in which concern was expressed that small businesses could not achieve and sustain real growth. They lacked easy access to investment capital, so I welcome the measures announced in the Budget that will pave the way for the creation of small business investment companies. Some people claim that those measures will not do very much, but I believe that, by making funds available up-front, they will take us some way along the road towards the creation of an environment in which small and medium-sized enterprises can achieve their full growth and potential, thus creating more jobs for the British economy.
	The Budget and its merits have been talked down by the press. However, it is a milestone; it is a measurement of the progress that we are making in achieving a better Britain where social justice is firmly established through economic strength. Our success will lead to a further term in office for the Labour Government after the next general election. The British people, in their heart of heartswhether those hearts be Conservative, Labour or Liberal, Scottish, Welsh, Irish or Englishknow and accept that this is the only way forward. It is the Labour way forward and the right way forward for Britain.

Nicholas Soames: I am delighted to have the chance to speak in the debate, and I shall be brief.
	Will the Chief Secretary to the Treasury explain why, in the particularly dismal and Alice in Wonderland speech made by the Secretary of State for Trade and Industry, the right hon. Lady seemed to be living in a completely different world to the one inhabited by the rest of us? It is certainly different from the world in which British business men and our citizens have to make their way.
	First, I shall explain to the Chief Secretary why the economy is not in the good shape that he will describe in his speech. Last year, Government consumption grew at its highest rate for 25 years; it rose by 3.75 per cent. Government capital spending rose by 9 per cent., but business investment declined and ended the year 5.5 per cent. below the figure at the end of 2001. Business fixed capital investment was down 9 per cent. in 2002, the fastest decline since the 1960s. Manufacturing output fell by 4 per cent. in that year.
	I should like the Chief Secretary to try to explain to the Secretary of State for Trade and Industry that if the spending and public service part of our economy is the only part that is growing, and is the main sustaining force behind our growth, the wealth-creating private sectorbusiness, commerce and enterprisewill decline. If business investment and productivity are weak, the long-term outlook for the economy is not healthy. I thus have no confidence in the Chancellor's mystical forecasts. The iron Chancellor has become the tax-and-spend Chancellor.
	I give the Chancellor credit for two announcements in the Budget. The first was about the reserve fund of 3 billion for the Ministry of Defence. However, I have a question about that for the Chief Secretary; he will know the answer. As so often with the Chancellor, it is impossible to tell whether that is new money. I know that it is not all new money and the Chief Secretary knows that it is not, but will he tell us what proportion of the reserve fund is new money? How much of it will go towards the deficit in the strategic defence review that has not been made up to the MOD, and how much will be from the additional moneys recently made available to the MOD? The Government promised that the SDR would be fully funded, but it has not been.
	Secondly, I welcome the belated injection of 330 million for additional domestic counter-terrorism measures. The House should be aware that that money is long overdue; indeed, it may not be enough to be truly effective for the home defence of the nation, but I hope that, even at this late stage, the Government will respond to a proven and real danger.
	Even with taxes raised 53 times since 1997, and with the tax take rising by 50 per cent., public services are obviously flounderingeven in my constituency. I take no pleasure in saying that. We had hoped that public services would improve dramatically, but the old tax-and-spend routine simply does not work, as we all know. That matter has been well dealt with in the previous debates. However, I have one important issue to raise and I should like the Chief Secretary, who is extremely gracious, to listen with care and to transmit my views to the Secretary of State for Trade and Industry.
	Every year, I undertake a pre-Budget survey in my constituency. It goes to every business man in my constituency. I do not claim that the results are scientific, but they give a broad indication of the way that people are thinking. The results are always fascinating and three vital points emerged this year. I am confident that the same three points would emerge in pretty much any seat in the land. First, 74 per cent. of those who responded believe that Britain is less competitive than it was in 1997, and they are absolutely right in that persistent belief. Secondly, 81 per cent. of them felt that Government regulation presented a significant handicap to running businesses, both small and large. Thirdly, when asked what the Chancellor could focus on to help their businesses, the reduction of red tape was ahead of all other issues.
	Certainly, no rocket science is employed in this, but burdens on business have led to productivity growth being almost halved in this country, as money and effort have flowed out of productive and enterprising companies. Mike James, who is the managing director of a company called Bio-Productions in Burgess Hill in my constituency, wrote a letter to me in which he said:
	Like most people who start and run their own business, I started out with a desire to make something. Now I spend  of my time looking after staff problems and complying with
	worthless
	legislation. If I could get out and meet customers more, and those could get out and pay more attention to their customers just imagine how much more business could be done.
	Hon. Members will find such views in any seat in the land.
	The Government must now show the will and effort to deal with those matters; otherwise our economy will become as sclerotic as Germany's, and what my constituents in business and commercefrankly, they are already reeling from the burden of tax risesmost want to know is when the Chancellor will finally deliver on his promise to reduce the burdens on business, or whether he will continue to take back with one hand what he gives with the other. If he does not deal with that, the country's competitiveness will continue to fall.
	I wish to make a point to the Chief Secretary. The Treasury has produced a consultation paper, together with the Inland Revenue, to review the residence and domicile rules as they affect the taxation of individuals. I am well aware of why they should have done thatthe Revenue persistently lobbied the Chancellor to do the same thing when my own party was in governmentbut I should like to make a very important point: a very large number of people come to London who are not residents here and who have special taxation arrangements. Many of those people greatly enrich our economy. They use the services of the City of London and they bring a great deal of money into this country, and I urge the Chief Secretary to be extremely cautious when dealing with that matter because that is a long-term ambition of the Revenue, which successive Chancellors have always seen off.

Angela Eagle: Despite the downbeat backdrop to the Budget, with increased uncertainties and the dangers of deflation, which my right hon. Friend the Member for Llanelli (Denzil Davies) pointed out in his speech earlier, the UK is doing better than our major competitors and the underlying indicators are sound. It is a mantra worth repeating that we have the lowest inflation rate for 30 years, the lowest interest rates for 40 years, the lowest debt:GDP ratio of any other G7 country and the highest ever employment levels.
	I welcome the fact that the Budget connects economic stability with social justice, and I particularly welcome the anti-poverty measures for children and pensioners, including the child trust bond and the abolition of hospital fees for pensioners. I also welcome the continuing extension of the tax credit scheme, which is progressive and is making work and savings pay.
	I wish to concentrate the rest of my remarks on the funding and reform of the public services, which clearly feature strongly in the Budget. I welcome wholeheartedly the fact that the Chancellor has ignored the many siren voices, not least on the Conservative Benches, calling for him to slash his planned expenditure on public services as a response to the world economic slowdown. He has made the right choice in persisting with that expenditure. Our task now is to maintain that investment, while getting value for money from it.
	While maintaining his fiscal rules, my right hon. Friend the Chancellor has provided huge new resources, targeted at front-line services61 billion extra over the current comprehensive spending review period and more thereafter for transport and the NHS. That funding comes after 25 years of neglect and underinvestment in capital and current spending in the public services. In 1997, public sector investment stood at a mere 0.6 per cent. of GDP, and its history has been one of huge and ongoing decline, so this is the largest sustained increase in public sector investment for 25 years.
	The Labour Government face a once-in-a-generation opportunity to make the case for the benefits of public provision and to renew our public infrastructure. If successful, we will live in a more just and fair society that offers opportunities and fair access to all. If we fail, the future for the public services will be bleak. Vital funding has been provided, so we now have to concentrate on the nature of reform; but what shape should that reform take? In effect, there are two models: the first I would describe as the marketising model, which introduces competitive price mechanisms and internal markets; the second I would call the empowerment model, which preserves public sector commitment, but empowers front-line staff within national standards and introduces accountability to the user as well as the producer.
	The Government's reforms currently fall into both categories. I wish to make the case for moving away from the marketisation model to the empowerment model. We can see that current confusion in the NHS reforms. I would characterise most of the NHS plan as the empowerment model, but foundation hospitals are firmly rooted in the marketising model, so we have standardised treatments in national frameworks that guarantee equity and allow a loosening of centralised management structuresall very welcome.
	We have devolved 75 per cent. of NHS budgets to primary care trustsvery welcomebut foundation hospitals will reintroduce competition for still scarce resources, abandoning the equity requirement by institutionalising advantage for one hospital over another and exacerbating the inefficiencies of the purchaser-provider split, with no guarantee on the value added. Raising local bonds, which has also been suggested, would totally destroy funding equity and ought to be resisted.
	Likewise in education, variable top-up fees marketise the choice of higher education establishments by introducing differential price mechanisms where none previously existed. That will inevitably make it harder for those of modest means to study at the elite and therefore more expensive institutions. That approach entrenches privilege in an already unfair system. Any attempt to mitigate that by increasing maintenance grants or introducing zero-interest loans is welcome, but it does not alter the detrimental effect that introducing the price mechanism and competition has on the prospects for fair access for all in the first place.
	Thus the marketising model undermines and weakens public services by introducing wasteful competition in the price mechanism. The empowerment model, however, strengthens public service by trusting the initiative and judgment of front-line workers and management and by increasing the transparency of results and the accountability to the user. We should aim for standardisation in our public service to improve equity and ensure that it is achieved, but when we have achieved standardisation, we should abolish centralised control, or loosen it at least. It is about time that micro-management of public services in Whitehall was abandoned for good. Thus the changes on flexibility and job-centred provision are very welcome. However, it is also important that that loosening of centralised control should not be replaced with excessive auditing, which can stifle initiative and creativity.
	Finally, I welcome the Treasury's publication of a discussion paper on the public services, as we need to debate the most effective models for reform. I particularly welcome the admission on page 12 of that document about the limitations of marketsthey fail because of monopoly, lack of information, externalities and the provision of public goods.
	It is in the public interest to aspire to more than the market will provide when left to its own devices. It is necessary, in pursuit of equity, sometimes to address market failure by direct public provision, particularly in areas in which people's opportunities or quality of life could be affected by lack of access, such as education or medical treatment. Without public provision in those cases, our society tends to the survival of the richest, and an increasing polarisation between the privileged few at the top and the extremely poor at the bottom. Such income distributions can be seen in Latin America, and, arguably, can now be seen emerging in the USA. In such societies, fairness and opportunity are replaced by the laws of the jungle. That is not a future to which we should aspire in the UK, and we will not see it if the Government's modernisation of the public services is successfully delivered and it avoids the marketising model. Let us get on with reform and improvement, let us achieve good value for money and political support for public services

Mr. Deputy Speaker: Order.

Archie Norman: I draw the attention of the House at the outset to my declaration in the Register of Members' Interests.
	From the point of view of business and enterprise, this Budget will probably be memorable for being the least memorable that the Chancellor has made to date. It is no criticism from the point of view of business people to say that it is largely devoid of substance. The fear for the business community is that it sits between the last tax-raising Budget that the Chancellor produced and the next tax-raising Budget that he will be obliged to produce, because, as my hon. Friend the Member for Mid-Sussex (Mr. Soames) outlined, the speeches of the Chancellor and the Secretary of State were both redolent of a total detachment from the reality of the business world. At the very least, there is a huge divorce in perception between what the business world and business leaders expect to happen to the economy and what the Chancellor expects.
	Business leaders will generally not be impressed by an approach that is simply glossily optimistic in outlook. The Chancellor said that he expectsit is all in the Red Booka step up in ICT expenditure in the course of the next year. Business people do not expect that to happen, and none of the chairmen and chief executives to whom I have spoken in the last few months is planning an increase in ICT expenditure. He said that he expects a dramatic turnaround in investment and 5 per cent. growth in investment next year, but it is getting very late in the day for companies to be planning that. The Red Book says that a recovery is expected in the financial markets, and predicts a dramatic recovery in our export markets, which depend not least on a recovery in the European economies that is not currently anticipated by any independent forecasters.
	That all adds up to a view of the world that is simply not shared by practitioners. I make that point not in a partisan way. The extent to which the Government appear detached from the view on the ground in the business and enterprise community is alarming. As was pointed out in the opening address, the Secretary of State came across as being simply out of touch with business realities, which is worrying for both sides of the House.
	There is nothing wrong with optimistic forecasts; what is wrong is to depend on them. Business has learned to its cost that the Marconi approach to budgeting leads to an early demise. We hope that the Chancellor is right in his forecasts, but I fear that few believe that he will be right.
	Against that background, the test of this Budget, which is broadly tax neutral, is whether it will do anything for the supply side of the private sector at a time when it is in comparative recession. My hon. Friend made an important point: what we have today is public sector boom and private sector recession. Were it not for the growth in public spending and the growth in private consumption, which is now faltering, the reality is that most of the private sector would be flat or declining. It is the public sector in Britain that is in growth, and that will continue next year. It is therefore important to recognise that while the Chancellor talks about the productivity gap, productivity growth in the public sector is much slower than in the private sector. He is doing nothing, and the Budget contains nothing, to boost productivity growth in the public sector.
	The hon. Member for Huddersfield (Mr. Sheerman), who is no longer in his place, made a powerful point about the absence of measures to drive better management and quality performance in the public sector. I shall give the House one example: in the last two years, expenditure in the NHS has increased by 22 per cent. but there has been only a 1.6 per cent. increase in treatments. That kind of result would be simply a recipe for disaster in the private sector, yet nothing is being done to change it. The Red Book talks about an incremental addition of 70,000 employees a year in the public sector. As things stand, those employees will go into some of the worst managed institutions in Britain, with anachronistic, old-fashioned, highly unionised work practices, and the Budget contains no measures to address that problem. That is a recipe for widening the productivity gap in Britain.
	When the Red Book talks about the productivity gap, it refers entirely to the private sector, as if productivity is something that happens in the private sector, not the public sector. Nothing is being done to improve the almost delinquent quality of management in large parts of the public sector, or the absence of quality management in the NHS, local authorities and elsewhere. We have no institute of public sector management in this country, and nothing is being done to address that problem, even though the public sector is growing fast. Amazingly, all we have in the Red Book is a reference to Professor Porter's study and a completely baffling proposal to ask the European Coal and Steel Community to spend some 17 million on further researching the skills gap. It seems that not much skill is evident in closing the skills gap.
	That brings me to the question of deregulation. The Budget represents a huge failure to address the problem of deregulation. As my hon. Friend the Shadow Secretary of State said at the outset, what is required is not picking away at bits of regulation, or removing 500 regulations, which were identified last yearonly a quarter of them have been removedbut a change of culture in Whitehall and in Government Departments. Overall, in the last year, we have had 3,839 new regulations, not 500, and we have had 19,000 regulations in the last five years. That is not a trickle but an avalanche, and a step change in attitudes and processes is required. We need a fundamental approach to address the Government's propensity to introduce more and more taxation and regulation.
	I want, for example, to draw attention to one particularly pernicious small element of the Budget that is exactly the kind of tax that the Chancellor and the Secretary of State said they had set their minds against: the proposal to increase the stamp duty on leaseholds. That is a tax on mobility, on transactions and on business flexibility. Although the Government say that they are consulting on the tax, I notice in the Red Book that the Chancellor has already taken account in his forecast of some 210 million in receipts from the change in tax. For many businesses, that will be a fourfold increase in the stamp duty that they currently pay on leaseholds. That is exactly the kind of anti-enterprise stealth tax that should not exist, and I hope that the Government will think again about it.
	In summary, this Budget represented an opportunity to address the problems of the supply side of the economy and the question of public sector reform. It has completely failed to do that, and it is, sadly, a missed opportunity. I hope that the Government will listen to the points expressed in the powerful speeches made on both sides of the House, and that they will address those problems in the months ahead.

Helen Clark: I want to begin by offering my right hon. Friend the Chancellor congratulations on the Budget, built as it is on the strength of an economy that has been consistently well managed since 1997. The widespread predictions of a difficult Budget have been made to look foolish, but I want to pick up one point concerning the future of fuel duty.
	There are unpleasant examples from the past of Governments not taking the best opportunities to reduce avoidable deaths in the population. We know from Cabinet papers that the dangers from smokingI speak now as a non-smokerwere understood in the 1950s, but Governments covered it up. Governments knew of the dangers of London smogs decades before the Clean Air Act 1956, with its attendance costs of implementation, was enacted. The truth is that what Government do by commission or omission bears a cost in human life and health, and that cost is often avoidable.
	Let us consider the case of diesel emissions, which are now avoidable by the use of new technology or alternative fuels. I shall cite American figures, because they are more dramatic. The American Lung Association points out that diesel exhaust is a complex mixture of thousands of chemicals, including more than 40 contaminants recognised as toxicants, carcinogens, reproductive and developmental hazards and endocrine disruptors. In 2001, it estimated that expected lifetime cancers in the US population would be conservatively estimated at 125,000 as a result of diesel exhaust.
	One of the many hazardous constituents of diesel exhaust is particulates. The health gains in the UK from reducing particle levels are greater than for those of any other pollutant. High PM10s levelsPM10s are the larger particulatescause congestive heart failure, heart disease and asthmatic attacks. PM10s are estimated to advance 8,100 deaths a year in Great Britain and to cause an additional 10,500 admissions to hospital. Diesel exhaust and particulates are just part of a range of pollutants that emerge from conventionally powered vehicles and that have not yet been tackled effectively by Government policy and by shifting the burden of taxes from environmental goods to environmental bads.
	We in the Environmental Audit Select Committee issued a pre-Budget report last week that questioned whether the Treasury had a clear long-term strategy on fuel duty that reflected environmental benefits. Let us consider liquefied petroleum gas, for example. It emits 99 to 99.8 per cent. fewer ultra-fine particles even than ultra-low sulphur diesel. Governmentsand particularly my right hon. Friend the Chancellorhave taken incremental steps towards tax breaks to the extent that the market is now showing promise, with some 90,000 LPG vehicles on the road from a start of virtually zero only a few years ago. That means that LPG fuels about 0.3 per cent. of the UK vehicle parc, but its potential is largely untapped. Fuelling Road Transport, a joint report of November 2002 by the Energy Saving Trust, the Institute for European Environmental Policy and the National Society for Clean Air estimated that the
	feasible penetration of the total vehicle fleet
	was as high as 10 per cent. and that the possible LPG vehicle parc was more than 30 times as great as it currently stands. That would deliver 30 times as much benefit to the environment and human health. That would surely be a valuable achievement for Government, the environment and society.
	The freeze on duty on LPG has encouraged car buyers and fleet managers to invest in cleaner cars. I note that my right hon. Friend the Chancellor intends to consult on the future fuel duty on LPG. I suggest that it is not the right time to reduce the incentive on the ground that it has begun to work. I say that for a number of reasons. First, as Fuelling Road Transport suggests, the market still has a long way to develop. Secondly, reducing the incentive would give the wrong signal to people thinking of investing in LPG cars. Where have previous commitments gone to giving motorists clear signals well in advance? Thirdly, what message does indecision, the uncertain nature of tax breaks and the potential removal of the incentives when the market is barely at a thirtieth of its potential give to those companies or people thinking of investing in a new, cleaner car fleet? Fourth, is it not the intention that the shift of taxation from environmental goods to bads should be permanent rather than temporary?
	Our Select Committee also made positive recommendations about the potential for biofuels. The European Union wishes to set targets for the consumption of biofuels so that their proportion of the total is 2 per cent. by 2005. Targets are a very good thing, because they are a test of the strength of the policy measures designed to achieve them. Perhaps if the Government had set a target figure for the LPG vehicle parc, we would be better able to judge where we were on the arc to success and to evaluate the justification of continuing the fuel duty concession. It is not too late to set such a target for LPG, and neither is it too late for biofuels. Why should officials fight shy of such targets? Far be it from me to suggest that benchmarking success might also result in the embarrassment of identifying failure.
	Let me return to my opening theme. People are dying because we have not cleaned up our conventional vehicle parc. The technology to do so is available now and not at a hazy and uncertain future date. The more we fudge and mudge in not setting targets and sticking with the environmental tax balance to achieve them, the more time is wasted in improving health and lifespans. I ask my right hon. Friend the Chancellor to throw these considerations into the balance when he considers the future balance of taxation on fuel and not to concentrate simply on measuring the relatively small scale of revenues forgone.

Alex Salmond: Last year, I broke the parliamentary habits of a lifetime by voting for the amendment of the law resolution. I had never done that before, but I did so last year even though I received no gratitude. I voted for the resolution because I agreed with the central tenet of the Budget, which was to increase direct taxation to fund public services. The increase was to national insurance and not to income tax as it should have been, and the increase took place some years late after public services had been starved of funds. I even ignored the fact that the Labour party attacked me vigorously when I tried to reverse its 1p cut in income tax four years ago. However, I thought it is better that one sinner repenteth and that we had to forgive and forget. I therefore supported last year's Budget because its central tenet was correct.

David Burnside: Will the hon. Gentleman give way?

Alex Salmond: I will do so in two seconds after I have come to the climax of my point. I would have loved to support the amendment of the law resolution again this year if I had been able to find a central tenet to support, but this Budget is totally directionless. It is complacent to the point of ignoring a whole series of key economic problems, with the Chancellor relying on growth forecasts that have declined again. He suggests that they will miraculously go up in a year or two, but, as key aspects of the economy move into reverse, he says, It is better than it is elsewhere. The Budget is without a central focus and direction that would take the country forward.

David Burnside: Has my hon. Friend calculated the impact on Scotland of the increase of national insurance contributions in April? Every independent business commentator, including those from chambers of commerce, the CBI and the Institute of Directors, has said that it will lead to major job losses throughout the United Kingdom. How many jobs will be lost in Scotland?

Alex Salmond: Exactly. That is why I would have preferred a 1p increase on direct income tax, rather than on national insurance contributions. However, I still think that direct taxation is the best way to fund public services. If public services were not funded and if they continued to decline as they did during the Conservative yearsunfortunately that was supported by the Ulster Unionist partyand the early years of the Labour Administration, tens of thousands of jobs would continue to be lost in key public services.

Mark Lazarowicz: If the hon. Gentleman is so keen on direct taxation, will he tell me why the Scottish National party manifesto for the next election says that
	the SNP will not increase income tax?

Alex Salmond: That is precisely because the Labour party has moved on to the ground on which we so bravely stepped out four years ago. We fought the election in 1999 on the programme of a penny for Scotland and we were vigorously attacked by the Chancellor of the Exchequer. He said that that was a reckless move, but some three years later he pursued a similar policy, yet he expects to take all the credit. I am prepared to concede that the Chancellor has moved on to our ground, and of course the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) was dragged along with him, but the hon. Gentleman cannot expect us not to claim victory when the Labour party ends up in the position that it should have adopted a considerable time ago.
	We come to the complacent bits of the Budget. The hon. Member for Dundee, East (Mr. Luke), for whom I have the highest regard, made a speech that I can describe only as the it hasn't happened to the same extent in Scotland speech. He listed a range of good things that he thought were happening, but said that they had not happened to the same extent in Scotlandtoo right. Scotland, under the Labour party, has the lowest rate of growth in the European Union. Our economy has contracted during the past year and manufacturing and exports have collapsed by 25 per cent. in a single year. We have the lowest rate of business survival in the United Kingdom. He cannot say that things have not happened to the same extent in Scotland because they have not happened at all. That is the reality of the Labour party's control of the Scottish economy.
	What does the Budget have as a surprise? It is differential pay for the public sector in the regions. We all know that the Chancellor wants to use the flexibility that has replaced prudence to reduce the pay of nurses, policemen and firefighters in the English regions, Scotland and Wales while increasing the relative pay of those in London and the south-east of England. How on earth will it benefit the regions of England and the nations of Scotland, Wales and Northern Ireland to reduce further public sector pay and demand in those economies?
	The Government have started to retreat from that policy, now that they have announced it. That is probably because I was on the radio with Jack Dromey on Thursday morning and he said that there would be a national strike if the Chancellor pursued the policy. We do not need a national strike in Scotland because all we have to do is to kick the Labour party out two weeks on Thursday, and that is exactly what we intend to do.
	I liked certain aspects of last year's Budget's central direction, although I was severely critical of individual measures. I cannot find the central direction of this year's Budget, but I do welcome one key measure for which I argued last year. Once again, Ministers have moved on to SNP ground because they have acknowledged that pipeline taxation for the North sea was differential and costing jobs. The Chancellor's move to end this discrimination will stimulate 1 billion of investment in the medium term, which is the equivalent of having three or four major finds in the North sea because of the incremental investment that will take place. That is the welcome development in the Budget.
	However, more is needed because after last year's tax hike, the number of exploration wells in the North sea has collapsed to 16. That represents a crisis situation. The Chancellor's Budget documents show that the Treasury is examining the matter. The time is right for that; it is urgent to do that quickly. We need further tax incentives for exploration and development. That is needed not to influence North sea production and revenue this year, or in five or 10 years, but because of what willor will nothappen to production in 15 or 20 years without additional exploration development.
	I am worried about the rural economy. In a Budget speech that was padded out with this, that and the next thing, I am surprised that the Chancellor did not find time even to mention the crisis of incomes in our rural farming economy, the crisis in the fishing economy or the range of pressures that our rural areas face.
	The Budget's complacency is suffocating. Its specifics often relate to trivial matters, while central key questions relating to the rural economy and other issues are ignored. I welcome bits and pieces in the Budget, such as the oil tax and the freeze again on whisky tax, but its measures will do nothing to address the low growth record of the Scottish economy under Labour or to give the Scottish Parliament and Executive the economic levers that are required to do the job. Incidentally, an opinion poll that was published today shows that 75 per cent. of the Scottish population would support that. As usual, the people are ahead of the politicians. In this case, they are dramatically ahead of the Labour Government. The time is closeit is a matter of days and hourswhen their record and stewardship of the Scottish economy will be held to considerable account at the ballot box north of the border.

Tom Harris: I received a pager message just five minutes ago that said, Don't worry, baby, your turn's coming up. I assume, Mr. Deputy Speaker, that that is not a new system of warning Members that they are about to be called to speak.
	A recurring criticism of the Government's recordwe heard it from the hon. Member for Tunbridge Wells (Mr. Norman)is that too many jobs are being created in the public sector, and that growth and employment over the past six years has largely been the result of an expansion in public sector jobs. My friend the hon. Member for Eddisbury (Mr. O'Brien)I use that phrase carefullyregaled the Government last week on television because, according to figures that he quoted, there are 9,000 fewer jobs in the private sector today than there were in 1997. That exposes an interesting agenda.
	The Conservative party are in a difficult position, as any Opposition are when the Government have a large majority. They want to give the electorate the confidence that public services would improve under a future Conservative Government, but are understandably reluctant to give spending commitments, and they want to restore their reputation as a tax-cutting party. So they end up in the ridiculous position of claiming that less investment in public services will produce better public services provided that they are reformed. Of course that is absurd.
	I agree with my hon. Friend the Member for Huddersfield (Mr. Sheerman) that public sector reform is essential. There has to be a balanced ticket. There is no point in saying that investment on its own will produce the better services that all our constituents require. Similarly, there is no sense to the argument that only an increase in public investment will produce those improvements. I would go at least as far as my hon. Friend and say that if we were not reforming public services, I would actively oppose any major increases in investment because my constituents and constituents throughout the country are not convinced that extra money alone is what is needed. We need radical reform of the public sector. Yet the Conservatives persist in a fantasy that they can dispense with that balance because only reform is needed.
	The last thing an official Opposition want is to acknowledge that the Government's economic record is impressive. Conservative Members have gone through contortions to convince themselves that Labour's economic record has been poor despite the fact that we have the lowest inflation for 30 years, the highest employment levels in our historyneither of which they mentionedthe longest period of sustained economic growth in living standards for half a century, a UK economy that has grown uninterrupted, free of recession in every quarter of the past six years, and historically low interest rates.
	Earlier I quoted from The World in 2003 published by The Economist and have two more salient quotes from it. That article states:
	Britain's public finances are likely to remain rock-solid, given a debt-to-GDP ratio of only 30 per cent. at the end of 2002 and a public deficit of less than 1 per cent. of GDP in 2003.
	It goes on to say:
	the current-account deficit in 2002 was a very moderate 1.9 per cent. of GDP. Given that Britain was in the midst of a consumer boom, while its European trading partners were experiencing recession, this modest deficit confirms that there is nothing uncompetitive about Britain's present cost structureand that the recent exchange rate has been about as close to a long-term equilibrium as could be imagined. How dull this all is for economists and hedge funds. But how lucky for the people of Britain.
	I would find it difficult to improve on that.
	The Conservatives face some difficulty in opposing our economic agenda. Listening to the hon. Member for South Suffolk (Mr. Yeo) at the Dispatch Box earlier, I was almost reminded of watching television last week, when the Iraqi Information Minister was insisting that the American troops had been driven back from the gates of Baghdad just as an American tank came into view behind him. The Conservatives have been saying tonight that all is doom and gloom: unemployment will go up, and investment and productivity are on the way down. They completely ignore the economic reality outside this place.
	That has left the Conservatives in a very difficult position. What can they do? How do they attack the Government's record? They cannot attack the number of jobs in the economy because it is at an all-time high. They cannot attack the quality of jobs because we are all supporters of the national minimum wage nowexcept, perhaps, for the Liberal Democrats. The Conservatives can only attack the sectors in which those jobs are being created.
	My right hon. Friend the Chancellor pointed out in his Budget statement last week that investment procured by this Government means that, by 2008, there will be an extra 80,000 nurses and 25,000 doctors in the NHS. Is that the public sector employment that the Conservatives are so unhappy about? What would be their solution? Would they cut the number of NHS nurses? Will that be a manifesto commitment? I hope so, but I suspect that they are too clever for that. They seem, however, to be on a difficult wicket.
	It is not particularly surprising that public sector employment has grown along with public investment. The public sector is, after all, the one area with which the Government have a direct relationshipmoney spent by the Government goes directly into the public services. The Government do not have that relationship with the private sector, so clearly they cannot directly create jobs in the private sector, but they can create the right economic conditions for the sector to flourish; indeed, they have a duty to do so.

John Bercow: Given that the massive increase in public expenditure on health and on the staffing levels in the NHS has not been matched by a commensurate increase in clinical activity, but that the hon. Gentleman is optimistic about reform, what reforms has he seen that will transform the picture?

Tom Harris: The hon. Gentleman makes a valid point. The Conservatives say that for all the investment there has been only a 1.7 per cent. increase in output, and I accept that. It would be ridiculous to say that a 100 per cent. increase in investment in health would result in a 100 per cent. improvement. No one would expect that; there is no correlation between percentage increases in investment and percentage increases in outcome. However, I am absolutely convinced that the reforms led by the Secretary of State for Health coupled with the investment made by the Chancellor in the last few Budgets will result in massive improvements in our health service by 2008.
	I hope that the people listening to this debatewho must number dozens throughout the countryunderstand that their choice is between a Labour Government, who support the NHS and will bring 80,000 new nurses into the service by 2008, and a Conservative party that has yet to say whether it supports the NHS in its current form. The Conservatives' claim that reform on its own will be enough to produce an increase in outcome is not convincing to anybody inside or outside this House. The Conservatives would rather level down public sector employment than significantly increase the number of public sector workers. The Conservative party has never been a friend of the public sector or the people who work in it.
	Rather than saying that an increase in public sector employment per se is a bad thing, surely it is better to produce the right economic conditions so that firms feel confident and can afford the investment needed to increase employment in the private sector, bringing it up to a level commensurate with the increases in the public sector. It seems to me that the Conservatives are ideologically opposed to the public sector and all who work in it.

Mr. Deputy Speaker: Order. The hon. Gentleman's time is up.

David Ruffley: Looking at the Budget, it appears that the Chancellor has exchanged prudence for rosya rosy scenario. The figures are clearly overoptimistic. I do not want to second guess the Chancellor's GDP forecaststhey might by some miracle turn out to be rightbut looking at the Red Book, I know two things: first, that tax will be remorselessly ratcheted upward in each of the next five years; and, secondly, that the Chancellor is not committed to the real reform of public services that was promised in exchange for more resources going into the public services.
	New Labour's high-tax policy is admirably summarised by tables C9 and C25 of the Red Book. They tell an interesting story. My right hon. and learned and very prudent Friend the Member for Rushcliffe (Mr. Clarke) bequeathed a tax burden of 34.9 per cent. of GDP in 199697. In each year of the last Parliament, the Chancellor of the Exchequer presided over a tax burden higher than the one that he inherited. The tax burden this year is 36.3 per cent. of GDP; next year, it is 37.1 per cent., rising to 37.6 per cent., then 37.9 per cent., and finally, in the fiscal year 200708, it rises to 38.2 per cent. of GDP.
	Those are very large increases in tax made merely to fund existing public spending commitmentsbefore the tax consequences emerge of the comprehensive spending review that the Chancellor is to announce next summer for the start of the following fiscal year. A couple of elections will be loomingthe Labour party leadership election and the general electionso we might expect the right hon. Gentleman to increase spending.
	Much more important is the evidence relating to the forecasts that I unearthed this morning in the Treasury Committee with expert witnesses. Alarmingly, the Committee was told by the National Institute of Economic and Social Research and the Institute for Fiscal Studies that even if the Chancellor's GDP growth forecasts were hit3 per cent. next year and more than 3 per cent. the year afterhe would still be staring at tax increases of 10 billion a year at the end of this economic cycle. There is one reason for that: he seriously overestimates the tax take that he will receive from corporation tax. Last year, that source accounted for 2.5 per cent. of GDP. The Chancellor believes that it will reach 3.4 per cent. of GDP by 2007-08. In other words, he invites us to believe that the tax take will rival that experienced in the booms of the late 1980s and late 1990s. No serious, responsible analyst believes that for a second.
	The second thing we know about the Budget from looking at the Red Book is that the Chancellor is stress testing to destruction the proposition that more money will magically improve public services. For the first time in our history, one in four of the work force is employed in the public sector. To see where some of our money is going, look at the jobs pages in The Guardian, where one finds such jobs as
	an adopt a river officer,
	or
	a Pennines bridleway national trail assistant co-ordinator,
	or a food and health co-ordinator
	to reduce barriers to the consumption of fruit and vegetables in Sandwell.
	The Prime Minister made promises about more spending being conditional on reform, but we can see that that is simply not happening. Take the NHS, in which there are now more bureaucrats than beds and five times more managers per nurse than in the private sector. A 20 per cent. funding increase since 19992000 has been accompanied by a 1.6 per cent. increase in hospital activity. Of the extra 5 billion spent after 200001, 80 per cent. went into higher drugs prescribing and higher salaries. Less than 10 per cent. went into expanding capacitycapacity that is the prerequisite of choice. Choice is something that the Chancellor of the Exchequer simply does not like. We know that because in chapter 6 of the Red Book he makes deeply disobliging comments about choice in the NHS. Borrowing powers will be severely circumscribed by his regulator putting a cap on the ability of successful foundation hospitals to expand capacity. The Chancellor is afraid that extra money will be used to buy private sector capacityhe is biased and prejudiced.
	Finally, we were told in the Budget that another report would be produced by dear old Derek Wanless, the man who produced the first 388-page Treasury report on NHS funding. He mentioned in one and a half sentences the impact that those huge increases in public spending would have on GDP as a result of the higher tax take associated with that high spending. That was a disgrace and a negligent carrying out of duty that ignored the effect on economic growth. Before Labour Members seek to intervene and talk about cuts, let me give them a fact to chew on. The Government's combined spending on health and education is equivalent to about 5,000 per household. If just some, if not all, of that was spent by putting it in the hands of individuals, and if the state monopoly was opened up, there would be more providers providing more effective and efficient services. There would be more services for any given level of Government expenditure, and they would be of a better quality as well.
	Conservatives are not suggesting that they want tax cuts tomorrow. We agree with Alan Greenspan that all taxes are a drag on economic growth, it is just a question of degree, which is something that the Chancellor of the Exchequer has not understood. He may wander around Cape Cod playing tennis with American economic enterprise gurus, but he has not discovered the key message. We cannot tax first and then ask questions about public service reform, and we cannot get the good-quality frontline public services that we want by trying to tax our way to success. It is not working, this Budget proves it is not working, and it will not work in future.

Jane Griffiths: I, too, congratulate my right hon. Friend the Chancellor on a Budget that I believe, in these difficult times, to be a visionary one. Much has been said this evening about a message, or the lack of one, but the Budget is visionary for reasons that I shall outlinebriefly, as I know that other hon. Members wish to contribute.
	I should like to sound a note of caution about road fuel duty. According to the figures in the Red Book, the freeze on road fuel duty can be expected to cause a small but significant increase in CO2 emissions if everything else remains the same. I very much hope in these turbulent times that everything does not remain the same, and that it will be possible to lift the freeze on road fuel duty for the benefit of the environment.
	I should like to highlight the question of regional pay, which was mentioned by my right hon. Friend the Chancellor in his Budget statement and referred to by the hon. Member for Banff and Buchan (Mr. Salmond), who is no longer in the Chamber. I welcome the Chancellor's assertion that there is an opportunity to look seriously at regional pay and deal with the very real problems for our public services caused by the high cost of living in the south-east and the Thames valley, where my constituency is, and the fact that our public services are creaking at the seams despite tremendous investmentpeople simply cannot afford to live in that part of the country on the relatively low salaries that most public servants still endure.
	I should like to highlight in particular the plight of constituents who staff the BBC monitoring service, located in my constituency, which has provided an invaluable and unique service to the nation in recent turbulent weeks and months. People who work there have to be fluent in two languages other than English and to have research and editorial skills. They start on 14,000 a year. The hon. Member for Newbury (Mr. Rendel), who is not in his place, has secured a debate on that very matter. It will take place in the near future, and I look forward to it with interest, as will other Members.
	I must emphasise the plight of those at BBC Monitoring and other public sector workers in my constituency and in the affluent, high-cost south-east of England. Also, I thank my right hon. Friend the Chancellor for providing an opportunity to put that situation right. That will not result in a national strike. My right hon. Friend the Paymaster General said earlier that national pay bargaining will continue. It is not going to be abolished and there will be national pay, but regional differences will be respected, acknowledged and taken care of. I look forward to that very much.
	I finish this brief contribution by saying that I know that the assessment of the economic tests for the single currency has been done. I look forward to the first week of June, and I hope that we shall see that the time is right for us to be economically at the heart of Europe as we are, politically, in every other way.

David Burnside: I refer to my declaration in the Register of Members' Interests. I want to comment on the Budget in the context of the past eight years. All I see since 1997 is an annual 8 billion increase in taxation on the British economy, and I see 74 per cent. of it being carried by the private sector and by business, which create the wealth that we spend on the public sector. I see a 1 per cent. increase in national insurance contributions, which will have a serious impact, as Opposition Front Benchers have said. It is a dishonest tax, not a straight tax, and it will hit jobs.
	In Northern Ireland, we have lost 11,000 manufacturing jobs since 1998. Only 95,000 remain, which is the lowest figure since 1920. Manufacturing output is falling, and output in computer and related industries has fallen in the past five quarters. The House should consider the fact that manufacturing and the private sector, which are wealth creating, are in recession. National insurance contributions should be directly related to benefits. They should not be used as a tool for increasing taxation.
	Like other Members, I surveyed business in my constituencySouth Antrimbefore the election. What were the major concerns? They were increased taxation and more regulation, and not just because business people always say that. More regulation is not some generality, because in Northern Ireland and, to a large extent, nationally, we are getting more and more regulations on environmental content, waste disposal, new maternity and paternity rights, new flexible working as well as single equality legislation. Regulation, regulation, regulationit is a cost and a burden to business.
	I welcome the Chancellor's announcement on the relocation to the regions taskforce. I hope that the attractiveness of Northern Ireland, its work force, our education system, wages and capital grants will be considered, and that we benefit in that relocation to the regions.
	I am disappointed, however, that there is nothing to help the farming industrynothing at all.
	We should consider the end product of increased taxationdelivery in the NHS and in the education service. When I look at Antrim hospital, I see a need for two new wards and about 40 extra beds because there are waiting lists. I think about my constituent in Ballyclare who recently went twice to the Royal Victoria hospital in Belfast, but came back, not because there were no consultants or nurses to carry out the operation, but because there was no bed.
	I consider the state of education and I hear the promises of increased spending. I look at the end product as well as the spending imbalance between primary and secondary education in Northern Ireland, where primary education spending is the lowest in the UK.

Roy Beggs: Does my hon. Friend agree that schools throughout Great Britain are suffering problems similar to those being experienced in Northern Ireland, in that the funding allocated does not permit them to retain experienced, well-qualified teachers. Schools are having to pay off experienced teachers to replace them with less qualified teachers. Does my hon. Friend agree that the Chancellor must allocate adequate funding to our schools?

David Burnside: I agree with my hon. Friend completely. The delivery of public sector spending is not coming through. The economy can be managed only by the Government and by those who run the public sector, and they are not delivering the money to the end user, who we in business used to call the customer. The customer is not seeing an improvement and a benefit in the product.
	I am not a cat person, but I have a cat at home. She is about eight years old and we called her Prudence. She is a yard cat but sometimes some members of my family allow her to come into the house through the back door. I do not. I think that a yard cat should stay in the yard. The cat comes in fast and goes out quite fast. She is lean, mean and cunning. When I see Prudence the Chancellor, I do not see anything lean or mean, although I do see a little cunningness. What I see most of in the Chancellor is more tax and a greater burden on the wealth-creating sector of the economythe sector that funds the health and the education service. The Chancellor is indulging in a little bit of spin in styling himself as Prudence, because Prudence is not slim, lean or competitive. I wish the Chancellor would be more like my cat.

Paul Goggins: It is a pleasure to follow the hon. Member for South Antrim (David Burnside), although I do not share entirely some of his criticisms of the Budget. Yes, we have an increase in national insurance contributionsit was announced last year and it will be implemented this month. Yes, additional borrowing is included in the Budget statement, but this borrowing is certainly prudent when compared with the borrowing that took place in the early 1990s. It is well within the rules that my right hon. Friend has already set out. Given the military action in Iraq and the difficult global economic downturn, I think that any fair analyst would say that the Budget is a fair one that was announced at a difficult time.
	I shall concentrate on three particular areas. First, there is a skills gap in our economy. It is quite breathtaking that in the United Kingdom, which is the fourth largest economy in the world, one in three adults lacks basic skills or NVQ level 2. It is estimated by some that a third of the productivity gap between the United Kingdom and the United States and some of our leading European partners can be attributed to this skills deficityet we know that high skills represent the future for our economy.
	I warmly welcome the announcement of a 130 million extension of employer training pilots. The pilots were announced last year, and about half a dozen are already under way in various locations, including Greater Manchester, which includes my constituency. The pilots mean that employees who lack basic qualifications are paid to receive basic or level 2 training, while employers are provided with a level of compensation. For small businesses, that is about one and a half times the wage costs, to make up for the loss that they incur when workers go into training.
	In Manchester, where we started the pilot in September 2002, the target for the first year was to get about 2,200 people on to level 2 training. That target was exceeded after only about eight months. We already have 2,500 people into level 2 training, and 500 employers are involved. This is reinforcing the sense of partnership between training providers, businesses and business links, which is so important. In view of the Chancellor's announcements last Wednesday, we are able to revise those targets. By August 2004, we expect to have 5,000 people engaged in level 2 training, 1,000 in basic skills training and some 660 companies actively engaged in the programme. The programme will increase not only productivity and competitiveness, not least in the north-west, but the prospects and earning potential of the individuals involved. Typically, those with NVQ level 5 can expect to earn three times more in wages than those with no qualification at all.
	The measure will sit alongside greater flexibility in the way in which advice and benefits will be delivered, greater access to capital, particularly for small businesses that depend on the knowledge economy, and, I am pleased to say, the review of the minimum wage requirements as they apply to 16 and 17-year-olds. It will extend the legal routes for people who want to come to this country not only to earn but to contribute to the economy. All those measures are welcome.
	The child trust fund has not been mentioned in today's debate, but is important. We know that the Government have already done a lot to reduce poverty, to provide greater opportunity through work and to redirect cash to the least well off in society. Many families, as a result of the working tax credit and other measures, will be substantially better off, but tackling poverty is about not just income distribution and redistribution, but building the asset base and the capacity of individuals and the wider community, particularly those people who have been excluded from society and the wider economy.
	We are told that there will be a 250 injection of cash into the fund when a child is born. The amount will be 500 where the family is entitled to the full amount of child tax credit. The state will, at certain key points, perhaps at the age of five, 11, 16 or whenever, add to the fund. Family and friends can make additional payments up to a maximum of 1,000 a year.
	The Chancellor said on Wednesday that he would announce further details in the summer, but I was pleased that, in a recent survey, 83 per cent. of parents said that they would consider making additional payments into the child trust fund. They thought that it was worth while. I have looked at reports from Virgin Money and PricewaterhouseCoopers. It is interesting that they say that the fund could produce massive benefits for children in the long term. Virgin Money says that if an additional 10 a month were paid during the 18 years of the fund following the initial 500 outlay to a child in a family entitled to full child tax credit, it would be worth more than 5,000 when the young person became 18. PricewaterhouseCoopers has estimated that, if every year the maximum 1,000 were contributed, that fund could be worth 26,000 by the time the young person became 18.
	We all know that wealth is concentrated far too much in the hands of the very rich. Meantime, one in 10 households in our country have no assets whatever. I believe that the child trust fund could begin to change that, promote saving as a good thinga necessary thingfor people, provide something that young people moving into adulthood can draw on, and reinforce personal responsibility.
	There is a balance to be struck between personal responsibility and collective responsibility. Perhaps in the 1960s and 1970s, we tended to veer too much towards the collective approach. Certainly in the 1980s and 1990s, we veered far too much towards the individual approach and failed to give people the resources that they needed to find a way through. I believe that the measure will be a significant development in providing opportunity for self-help and self-reliance, which is a good thing and vital to healthy communities.
	I want to make one final point about international development, which my right hon. Friend the Secretary of State for Trade and Industry mentioned. It is interesting to note that international development was once barely a footnote in Budget speeches, yet now it is a central feature as we strive

Mr. Deputy Speaker: Order. I call Dr. Vincent Cable.

Vincent Cable: I understand that I have five minutes, so I shall confine myself to two very brief points, the first of which relates to what is probably the Government's strong point: their record of economic stability and the so-called ending of boom and bust. In part, this reputation is justified. Probably the best thing that the Chancellor ever didand ever will dowas making the Bank of England independent. We have seen some of the benefits of that, but the problem is that it has not been fully matched through fiscal policy. True, there is a fiscal policy framework and fiscal targets, but the problem in terms of stability and long-term credibility is that the Chancellor measures his own performance. That differs markedly from the Bank of England, which has a very sound structure, real transparency and real independence. No comparable organisation exists on the fiscal policy side.
	Let me give one or two examples. Absolutely critical to the credibility of the Government's fiscal policy is balancing the budget over the cycle. However, who defines the cycle; who decides when it begins and ends? The answer is, the Chancellor. What is missingin a sense, the Chancellor himself can remedy thisis some form of independent mechanism of assessment, such as the United States Council of Economic Advisers or our own National Audit Office, to create an independent base for establishing the credibility of forecasts. If such a mechanism is not established, the problem will be not merely the Government looking a little foolish in a year or two's time, but a loss of confidence in the markets.
	The Government have gained enormous advantage from lower short-term interest rates than would exist without an independent monetary policy. However, once credibility in the forecast is lost, the sacrifice in terms of fiscal policy is much higher long-term market interest rates than would otherwise exist. The effect of that will be felt in the long-term cost of capital, and in further damage to investment. So there is a real problem with the fiscal policy system's lack of independence and credibility, for which a price will ultimately be paid.
	The second failure relating to the abolition of boom and bust is in the housing market. In my adult life, I have lived through three major upswings in the housing market, two of which were followed by very serious crashes, and I fear that that may well happen again. We do not know exactly when the tipping pointto use the current jargonwill occur, but when the housing market does turn the consequences will be very severe for those who are heavily mortgaged. They will move, as they did during the previous two housing crashes, into negative equity. That will also be very serious for the reason that Mervyn King, the Governor-elect of the Bank of England, has warned. It will bring to a premature end the boom in consumption fuelled by equity release, which will go rapidly into reverse and have a major effect on consumption.
	It is fair to say that the Chancellor's Budget did address issues associated with the housing market. Rightly, there has been an entire series of studies, although they are probably somewhat late, given that the current boom has been going on for several years. However, certain housing issues have not been addressed and I hope that the Government will address them. For example, it is fine to look at the planning system, but who is examining the size of the land banks held by many developers? Has an inventory ever been attempted? Has the Chancellor considered fiscal measures that could bring some of that surplus land into production? For example, have the Government looked at the operation of the regulatory system in the financial services sector as it affects the housing market?
	A system exists, operated by the Financial Services Authority, through which the Government, for prudential reasons, examine loan-to-income ratios across the banking sector. However, they do not follow the example of Hong Kong and use that system to try to manage the housing market. Of course, the old days of special deposits and the regulation of banks are completely inappropriate and would not work. However, the Government have made no attempt whatever to examine mechanisms used in other market-friendly economies, to try to manage the housing market in such a way as to prevent the recurrence of boom and bust. I fear that within the next 12 months a serious deterioration in the housing market may well occur that will bring all the optimistic forecasts and assumptions about revenue and growth to a premature end.

Michael Howard: Let me start by drawing attention to my declaration in the Register of Members' Interests.
	I congratulate the Chancellor on the personal good news that he announced 10 days ago. I also congratulate those who have spoken today in what I thought was a particularly interesting debate, featuring many distinguished contributions. I especially enjoyed the speech of the right hon. Member for Llanelli (Denzil Davies). I always say that, because the right hon. Gentleman represents my home town, but this was, I think, one of the few occasions on which the House genuinely regretted the falling of the guillotine, which prevented us from hearing the end of his interesting dissertation.
	While I am in the business of offering congratulations, let me also congratulate the Chancellor on the timing of the Budget. It was a masterpiece of foresight. As the Chancellor delivered his speech, the television screens of the nation were dominated by attempts to topple the statue of Saddam Hussein in Baghdad. The Prime Minister was right to tell the Chancellor, You don't need to announce the results of the euro tests to divert attention from the Budget. Events in Baghdad were doing that for him, and what a relief that must have been, for this was the Budget that he did not really want anyone to notice.
	This was a bad news Budget. This was a Budget that required the Chancellor to come to the House yet again and admit that he had got all his figures wrong. This was his Micawber Budget, based on the premise that something would turn up. Economists at HSBC talk of the Chancellor's wishful thinking. At Citigroup they say:
	The Chancellor... has chosen to cross his fingers and hope this problem vanishes.
	The business editor of The Independent says that the Chancellor is
	entering the realms of fantasy.
	The Economist says:
	The Chancellor's most worrying deficit is his growing credibility gap.
	For once, even the BBC got it right. On BBC2, the Chancellor's Budget broadcast was sandwiched between The Weakest Link and The Simpsons, and on Radio 4, it was slotted in somewhere between Getting Nowhere Fast and Prayer for the Day. Indeed, Prayer for the Day would be a suitable title for the Chancellor's Red Book.
	The truth is that although the Chancellor was brilliantly successful in timing his Budget, his ability to get his economic forecasts right has vanished into the fantasy world that he now occupies. For the second time in barely four months, he was obliged to come to the House and tell us that he had got it all wrong. At the end of November he was forced to admit that his forecasts on growth were wrong, his forecasts on revenue were wrong, his forecasts on borrowing were wrong and his forecasts on his deficit were wrong. Last Wednesday he was back at the Dispatch Box to admit that his forecasts on growthdelivered barely four months agowere wrong again, that his forecasts on revenue were wrong again, that his forecasts on borrowing were wrong again, and that his forecasts on his deficit were wrong again.
	Of course he produced his usual litany of excuses. He blamed the Germans, he blamed the eurozone, he blamed the world. He told the Cabinet that the world economy had faced the most rapid slowdown for 30 years. That is simply not true. On the very day the Chancellor delivered his Budget, the European Commission told us that the world economy had grown by 2.9 per cent. last year and was forecast to grow by 3.2 per cent. this year. In the early 1990s the world went through three years of growth averaging just 1 per cent. Does the Chancellor not realise how degrading it is to his office and to himself to violate the facts in this way?
	The Chancellor told the House that we were doing better than other countries. That will be news to the United States, Canada, Australia, New Zealand, Spain, Sweden and Ireland, all of which grew more quickly than we did last year and most of which are expected to grow more quickly than we will this year. Does the Chancellor not realise how degrading it is to his office and to himself to make such misleading claims? And does he not realise that the lie is given to all his excuses by the fact that independent forecastersthose whose forecasts he publishes in his own documentswere telling him all the time that he was getting it wrong, that he was being too optimistic, and that he was likely to have to eat humble pie?

Barry Gardiner: Will the right hon. and learned Gentleman enlighten the House as to why, if the Chancellor has got so much wrong, the World Bank, the International Monetary Fund and the Organisation for Economic Co-operation and Development all say that Britain's economy is the best placed to weather the economic downturn that the world is facing?

Michael Howard: I am afraid that that is not what they say at all. I have already cited the economies that were growing faster than ours last year and are likely to grow faster this year, too.
	The independent forecasters are saying the same thing again about the forecast that the Chancellor gave the House last Wednesday. On the very day of the Budget, the IMFto which the hon. Member for Brent, North (Mr. Gardiner) gives so much credencepublished its forecasts, predicting lower growth for our economy next year than did the Chancellor. Other independent forecasters also believe that the Chancellor is being too optimistic. Robert Chote of the Institute for Fiscal Studies says:
	Hope in the Treasury clearly springs eternal.
	Martin Weale of the National Institute of Economic and Social Research says that the Chancellor has
	continued the tradition of ignoring the biggest risks to his fiscal projections.
	The economists at Lehman Brothers say:
	There is now practically no-one in the same ball park as him.

Rob Marris: The right hon. and learned Gentleman talks about forecasts, so can he enlighten the House about some others? The hon. Member for North Wiltshire (Mr. Gray) has said:
	We propose a cut in taxation. At no stage have we proposed a cut in public spending.[Official Report, Fourth Standing Committee on Delegated Legislation, 3 April 2003; c. 9-10.]
	The hon. Member for Arundel and South Downs (Mr. Flight) said that
	the figure of 20 per cent. referred to the scope to cut waste in government.[Official Report, 9 April 2003; Vol. 403, c. 324.]
	And the right hon. Member for Wokingham (Mr. Redwood) said that
	20 per cent. off the overhead is not enough. [Official Report, 9 April 2003; Vol. 403, c. 306.]
	Will the right hon. and learned Gentleman tell the House how much his side would cut?

Michael Howard: What a pathetic attempt to divert attention from the Chancellor's failures. That is a Labour party lie. Labour's claims about our policies on public services are untrue. We are not proposing cuts in frontline services.

Rob Marris: On a point of order, Mr. Deputy Speaker, the right hon. and learned Gentleman has intimated that I have been lying to the House, but I was quoting from Hansard.

Mr. Deputy Speaker: No such accusation has been made, because that would have caught the attention of the Chair.

Michael Howard: Is anyone in doubt that huge sums of taxpayers' money are being wasted on bureaucracy? We are seeking ways to save that money because taxpayers expect nothing less, and we make no apology for saying so.
	I shall return to the Chancellor and his forecasts. This is a Chancellor who used to boast about his caution and preen himself on his prudence. His chief economic adviser and permanent secretary spent six pages of their book warning that policy makers should err on the side of caution in making their forecasts. The Chancellor has long abandoned that approach, and the country will pay the price.
	Let us look at the Chancellor's figures on borrowing. At the last election, this Chancellor said that it was by cutting debt interest payments that he was able to fund health and education, and that
	any policies that would raise debt interest payments . . . would put that at risk.
	But look at him now! Two years ago in the 2001 Budget, the Chancellor forecast borrowing over five years at 30 billion. Last year, the forecast went up to 72 billion, and last week up to 118 billiona fourfold increase in two years. Independent forecasters are queuing up to say that that is yet another underestimate. How can anyone have confidence in his figures after that? If the Chancellor had not put so many of his liabilities off balance sheetEnron-stylepublic sector debt would be higher still and he might well have already reached the 40 per cent. limit in his sustainable investment rule. So much for reducing debt, for prudence and for all those broken promises.
	What about the Chancellor's promises to business? This is the Chancellor who promised:
	We will not impose burdensome regulations on business because we understand that successful businesses must keep costs down.
	This is the Chancellor who tells us every year that he has delivered a Budget for enterprise. Now, however, he is being judged by his performance, not his promises. That performance has added costs to business in tax and red tape, estimated by the CBI at up to 15 billion a year. That performance has led to an average 15 new regulations every working day, a figure that is 50 per cent. up on 1997. His performance has led to Britain falling out of the top 10 in the world competitiveness league.

Tom Harris: Before the right hon. and learned Gentleman moves on, can he name three regulations introduced by the Government that a Conservative Government will abolish?

Michael Howard: The hon. Gentleman has asked me that before, and I have answered it before. I suggest that he have a look at the regulation I mentioned then, under which will be set up an extraordinary scheme calledbelieve it or notthe fenestration self-assessment scheme, or Fensa for short. People will have to apply on forms in triplicate if they want to change the windows in their houses. The hon. Gentleman should read the answer I gave him when last he asked me that question.
	The Chancellor said last week that business investment has fallen around the world. CBI research shows that the fall in business investment was much sharper here in the UK than it was in the United States, in Canada, in Spain, in Italy, in France, in the Netherlands and in Belgium. It was sharper here than it was even in Germany and Japan. Does the Chancellor not realise how degrading it is to his office and to himself to violate the facts in that way?
	The Chancellor said last week that progress had been made on productivity, but productivity growth has almost halved since he became Chancellor. An editorial writer on the Financial Times described the Chancellor's claim on productivity as
	a classic in its selective use of statistics, its use of inconsistent time periods and its exploitation of irrelevant data revisions. It was thoroughly misleading.
	Does the Chancellor not realise how degrading it is to his office and to himself to make such misleading claims? Is it any wonder that what he says about business and enterprise is no longer believed?
	The Chancellor promised last week to tackle red tape, yet seven out of 10 companies surveyed by PricewaterhouseCoopers did not think that his promises would make any difference. The business editor of The Independent said:
	As for being a Budget for business that . . . is so much poppycock.
	In the light of all that, how does the Chancellor think business feels when people read that Treasury officials were directing journalists to a recent piece by Polly Toynbee in The Guardian headed British Business is not Burdened but Pampered? That piece concluded that
	the business world is . . . ignorant and ungrateful for its low tax status.
	Is that what the Chancellor thinks? Is it any wonder that only 1.9 per cent. of business leaders believe that the Government have a thorough understanding of their needs?
	This is the Chancellor who said, hand on heart:
	I want tax cuts for business not tax rises.
	Now he is being judged by his performance, not his promises.
	Last April, the Chancellor was warned that his rise in national insurance contributions was a tax on jobs. He was warned that it would cause companies to move jobs abroad. When I raised those concerns in the House a year ago, he described them, from a sedentary position, as nonsense. Now there are reports of companies doing exactly what the Chancellor then described as nonsense. The British Chambers of Commerce says that one firm in five is thinking about laying people off as a result of the rise in national insurance contributions. Does the Chancellor not realise how degrading it is to his office and to himself to disregard the facts of economic life in such a cavalier way?
	What about the Chancellor's promises on pensions? In 1993, he told the Labour party conference:
	I want the next Labour Government to achieve . . . the end of the means test for our elderly people.
	Now he is being judged by his performance, not his promises. Almost six in 10 pensioners will soon be subject to the means test as a direct result of the changes that the Chancellor has introduced. In all, up to 25 million people could be in households on means-tested benefits from 200304. The Chancellor is determined to make us a means-tested nation, to create a dependency culture in which, all the way up the income scale to 66,000 a year, people become dependent on the Chancellor's largesse. Does not the rise in means-testing send out loud and clear the signal, The more you save, the less you get? Is it any wonder that the savings ratio has halved since Labour came to power, as last week's Budget shows?
	What of the damage to savings caused by the Chancellor's pensions taxa tax that has cost 12 million people an average of 400 a year? A typical pension saver now retires on just half what he or she would have received five years ago. That is partly because of the effect of the pensions tax on British stock markets, which, since 1 May 1997, have substantially underperformed compared with those of the United States and France.
	Help the Aged says:
	With pensions and savings in freefall this Budget was the Chancellor's opportunity to take decisive action . . . but it appears that the Government's approach to financial security for pensioners is to cross its fingers.
	Last week, the Chancellor spoke of there being a case in principle for adopting a new inflation indexthe harmonised index of consumer prices, or HICP, pronounced hiccup for short. What he did not say was whether it would apply also to the upratings of pensions and benefits. Will the Chancellor confirm that, on the basis of his own inflation forecast, pensioners would find themselves almost 1 a week worse off in 200607 if he were to make such a change? Will he rule out that change now? Will he instruct the Chief Secretary to rule out that change when he replies to this debate in a few minutes' time?
	What of the other tax rises? The Labour manifesto in 1997 said:
	New Labour is not about high taxes on ordinary families.
	The Prime Minister said:
	We've no plans to increase tax at all.
	I must say that, as my hon. Friend the Member for Chichester (Mr. Tyrie) pointed out this afternoon, it must have been cold comfort to the Syrians to hear the Prime Minister use exactly the same formulation this afternoon when he said that there were no plans to invade Syria.
	The Chancellor said:
	My approach is not to tax and spend.
	However, the Government are now being judged on their performance, not their promises. Before the Budget, there had been 53 tax rises under Labour. Last week, seven more were added to the list. They included a 38 per cent. rise in red diesel duty for farmers and an extension of the Chancellor's IR35 stealth tax. There was also confirmation that council tax revenues are up 12 per cent. this year. There have therefore now been 60 tax rises under Labour.
	The Government will be taking 405 billion in tax this year. That is 50 per cent. up on 1997 and the equivalent of 44 a week more in tax for every man, woman and child in the country. This month alone, the Institute for Fiscal Studies estimates that well over 4 million householders will lose more than 10 a week from the Chancellor's tax rises. When council tax rises are included, a typical family in a band D house will be 568 a year worse off. And there are more tax rises to come.
	The Red Book shows taxes rising as a share of national income until almost the end of the decade. No longer is there any pretence of jam tomorrow. We are now on the road to higher taxes for the duration of this Governmenthowever long or short a period that may be. By 200708, the Chancellor intends that 38.2 per cent. of national income will be taken in tax, compared with 34.9 per cent. in 199697. He plans to raise an extra 251 billion in taxes in 200708 compared with 199697. That is an extra 4,272 a year for every man, woman and child in the country. As my right hon. Friend the Leader of the Opposition said in his response on Wednesday, with this Chancellor and this Government it is pain today and pain tomorrow. How does the Chancellor ever expect people to trust him on tax again?
	What of the right hon. Gentleman's promises to link spending with reform of the public services to ensure that those services improve? We have heard a lot about that from many contributors to the debate. In 1997, the Labour manifesto stated:
	The level of public spending is no longer the best measure of the effectiveness of government action.
	In fact, from this month the Government will be spending more than 50 million an hour. The Chancellor promised that not a penny more would be spent on the health service until the Government had introduced the changes that would
	let us make reforms and carry out the modernisation the Health Service needs.
	The Chancellor said that 18 months ago. What has happened since? As my hon. Friend the Member for Tunbridge Wells (Mr. Norman) said, over two years we have seen a 20 per cent. rise in spending on the NHS matched by an increase of only 1.6 per cent. in the number of hospital treatments in the same period.
	Last year, 300,000 people without insurance paid for their own treatments because they could not rely on the NHSthree times as many as when Labour came to office. Last year, 30,000 of our children left school without a single GCSE. There was a 20 per cent. increase in violent crime.
	Who is to blame for the millions of pounds of taxpayers' money simply wasted by the Government? Who is to blame for the 350 million-plus spent on refurbishing Departments in the four years to February 2002; for the increase of 3.5 billion, or more than 25 per cent., in the cost of running Departments; and for the fact that there are more bureaucrats than beds in the NHS?
	When we last debated those issues, in February, the Chancellor endeared himself to some of my constituents[Interruption.] The right hon. Gentleman will want to listen to this. He revealed himself to be an avid reader of the Folkestone Herald, and especially of the weekly column that I write in that august publication, but he also revealed more than he meant to about his approach to the problems our country faces. In one of those articles, I had criticised the fact that my constituencyalas, like many other constituencieshas fewer GPs than it should have. The Chancellor said that I was asking for yet more money. He did not seem to know that he had already provided the money, as the local primary care trust confirmed. The problem is not the money but the difficulty in recruiting and retaining GPs.
	In another article, I had called for more social housing. The Chancellor castigated me for that, too. Yet again, he said that I was asking for more money. He did not seem to know that he had provided the extra moneymoney that, in July 1998 the Deputy Prime Minister described as a
	significant additional investment in housing.
	Since 1997, however, the number of newly built social houses has fallen by a third, despite the extra money, while the number of homeless households having to live in bed and breakfast accommodation has trebled.
	What hope is there for our country when we have a Chancellor who does not even know that he has provided the money for those programmes, and who assumes that if there has been a lack of delivery the only answer is yet more money? What hope is there for our country when we have a Chancellor whose only remedy for all the problems that we face is to tax and spend and fail?
	Is it any wonder that the Secretary of State for Health, who was not allowed to take part in the debate, has warned of
	one hell of a lather about taxes rising?
	He said that many people would conclude that the Government have already tried that approach,
	but actually it isn't working.
	People want a different approach, a different way. They want a Government who trust the good nature and commonsense instincts of the British people to get on with their own lives without being tied up in red tape and regulations. They want a Government who reward hard work instead of penalising it, and who encourage saving instead of punishing it. They want a Government who will spend their money wisely. They want a Government who will introduce real reform to our public services. They will never get that from this Government who know only how to tax, how to spend and how to fail.
	The Budget is yet another futile chapter in that litany of failure. That is why we shall vote against it tonight.

Paul Boateng: Over-egged, over-long and vaguely unpleasant; the only truth that was missing was the fact that the British economy has grown, is growing and will continue to growsomething that the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) strangely failed to mention. The reality is that, in the main, this has been a very good debate in which right hon. and hon. Members on both sides of the House have made some important and worthwhile contributions, and I will just refer to a number of them.
	My hon. Friends the Members for Sunderland, North (Mr. Etherington), for Huddersfield (Mr. Sheerman) and for Wythenshawe and Sale, East (Paul Goggins) stressed the importance of the enterprise culture and our work to promote innovation and science, which is absolutely essential if we are to address the productivity issues that have concerned all hon. Members.
	My hon. Friends the Members for Reading, East (Jane Griffiths), for Glasgow, Cathcart (Mr. Harris) and for Peterborough (Mrs. Clark) stressed the importance of ensuring that we build on the growth that is occurring in the private and the public sectors, that we recognise the importance of productivity in the public and the private sectors and that the challenges of both those sectors need to be addressed. The Government would be the first to admit that we still have a way to go, but the Budget lays out the challenge, establishes very clearly the basis of macro-economic stability on which we have proceeded and stresses the importance of working together to bridge the productivity gap and to narrow the gap that undoubtedly exists between ourselves and the United States.
	Two important contributions were made by Opposition Members. The right hon. Member for South-West Norfolk (Mrs. Shephard) talked importantly about the need to ensure that we maintain the course that we have started on in relation to environmental taxation and do not miss the opportunities that exist. That is undoubtedly the case, and, with bioethanol, we have begun the process of recognising what alternative fuels can produce for the agricultural economy and the environment generally.
	The hon. Member for Mid-Sussex (Mr. Soames) said that we must address the needs of the armed forces. We have done that, and I am sure that he will recognise the fact that the last settlement for the armed forces was, as the chiefs of staff have recognised, perhaps the most generous for 20 years. In relation to the contingency reserve that my right hon. Friend the Chancellor has made to ensure that we meet the challenges of the conflict in Iraq, I can give the hon. Gentleman the assurance that he seeks: that 3 billion is new money, over and above the allocations that have been made already.
	I wish to end my review of the speeches that have been made with reference to the contribution made by my right hon. Friend the Member for Llanelli (Denzil Davies), because I wholeheartedly agree with the shadow Chancellor that he made an important contribution, in which he very rightly focused on the changes of managing globalisation. Indeed, the backdrop to the Budget has been a global economic slowdown and a hesitant global recovery.
	Hon. Members on both sides of the House will recognise the picture that my right hon. Friend painted of a complex and challenging global economy, and the Budget seeks to address precisely that. The world economy has been stalled by continuing uncertainties about the conflict in Iraq. That has affected the world economy, world trade growth having slowed to zero and our oldest and strongest competitorsthe USA, Germany and Japanhaving been in recession in the past two years.
	The Budget confirmed that no country can remain immune to the effects of that global uncertainty, but as a result of the economic framework that the Government have put in place over the past six years Britain is better placed than many of our competitors and better placed than in the past to withstand the difficulties and to ensure that we are not diverted from our priorities. Our priorities are investing in our public services, encouraging enterprises, achieving full employment and tackling child and pensioner poverty to build a Britain of economic strength and social justice. Unlike Opposition Members, we do not believe that the two are inconsistent. We believe that the two can be achieved by working together.

John Bercow: Will the Chief Secretary give way?

Paul Boateng: In due course.
	What we know, however, is that we have had a range of opinions from the Opposition recently on the economy. I want to tease out a number of those before allowing the hon. Member for Buckingham (Mr. Bercow), who is so keen to contribute, to have his say. He represents one opinion that has been dismissed from the Front Bench, so we ought to give him an opportunity to make the point that he was denied the opportunity to make from the Front Bench.
	Before we do so, however, it is our duty to draw the attention of the wider world to a particular absence from the Front Bench debate throughout our discussions on the Budgetthe absence of the hon. Member for Arundel and South Downs (Mr. Flight)[Hon. Members: He's there!] I know that he is there; I gave him a wave as he came in, because I feel that we need to make him more welcome. He is not so much the shadow Chief Secretary as the phantom Chief Secretary or the spectral Chief Secretary, as he is not allowed to say anything. It was his economic judgment that Britain's economy today is akin to that during the depression of the 1930s. That was what he shared with us when he was last allowed to speak. So embarrassed was Conservative central office by that contribution that it described it as the contribution of a City expert rather than that of a Conservative Front-Bench spokesperson.
	That does not bode well for his future on that Front Bench, because he was the shadow Chief Secretary who promised 20 per cent. cuts across the board. That is what the Conservatives told us they were studying[Hon. Members: Never.] That is what they have in store for us should they ever be given the opportunity again to govern. They say, Never, but that is not what the Leader of the Opposition, the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said. He confirmed that the cuts were across the board. The hon. Member for Arundel and South Downs said:
	I am digging through current spending, finding opportunities for cuts. It's too early to say how much but it could be up to 20 per cent.
	They went on to confirm that it was indeed 20 per cent. that was to be cut, with the right hon. Member for Chingford and Woodford Green referring to
	extra staff that don't deliver in the NHS and...wasted consultants.
	How many consultants are they going to sack? How many nurses would they not employ if they were allowed to introduce their 20 per cent. cuts? I shall give way to the hon. Member for Arundel and South Downs. I hear not a word. The reality

John Bercow: Will the Chief Secretary give way?

Paul Boateng: No, not yet. Should I give him his chance? [Hon. Members: Give way!] All right, I am all heart.

John Bercow: I am very grateful, because I think that the words down market were invented to describe the Chief Secretary. Given that the big rise in expenditure on and employment in the national health service has not yet been matched by a commensurate increase in clinical activity, thereby necessitating structural reforms, can he identify among all the reforms that the Government are introducing just three?

Paul Boateng: That is simply not true. There have been 730,000 additional admissions to hospitals and more than 200,000 additional treatments. All that has been achieved in the modern NHS; all that has been achieved by primary care trusts; all that has been achieved by new methods of inspection and regulation; and all that has been achieved by a new focus and a new emphasis.

John Bercow: On a point of order, Mr. Speaker.

Mr. Speaker: I do not think that it will be a point of order, but I will listen to the hon. Gentleman.

John Bercow: I seek your guidance, Mr. Speaker. I would be very sorry if the quality of this debate were to deteriorate because the Chief Secretary had misheard me. I asked simply for the identification of three reforms.

Mr. Speaker: The hon. Gentleman's sorrow has nothing to do with the Chair.

Paul Boateng: We still have not heardwe are still waiting to hearfrom those on the Opposition Front Bench as to how many nurses and consultants would be cut? What is it that they have in store for the NHS by virtue of charges? What is it that they have in store for the NHS in terms of private insurance? All those things were promised by the hon. Member for Arundel and South Downs.
	Let us move on. The truth of the matter is that today, when 20 other countries have been in recession, Britain has experienced the longest period

Michael Howard: Will the right hon. Gentleman give way?

Paul Boateng: Not at the moment. [Hon. Members: Give way.] Let me finish my point.

Michael Howard: rose

Paul Boateng: Do not worry. You will have your chance. The right hon. and learned Gentleman gave way only once to Labour Members, so why should I give way? [Hon. Members: Twice.] All righttwice. I will give way.

Michael Howard: Will the Chief Secretary withdraw that complete inaccuracy about the number of times that I gave way? He was completely wrong.
	The Chief Secretary has made a great deal, as have other Labour Members, about the number of extra people employed in the public services. Can he tell the House how many teachers are being served with redundancy notices today?

Paul Boateng: What I can tell the House is that, next year, spending for schools is increasing by 11.6 per cent. What I can tell the House is that we have provided 3,100 funding on average for 11 to 15-year-old pupils and that this year the figure was 3,750. We are continuing to invest in education, and standards are up. Children are being taught, in the main, in smaller classes. How many teachers will the Conservatives sack to meet the 20 per cent. across-the-board cut that they have promised? Answer comes there none.
	The truth of the matter is that, while 20 other countries have been in recession, we have experienced the longest period of continued growth for half a century. In the early 1990s, inflation reached almost 10 per cent. under the Conservatives. A decade on, we have seen inflation at its lowest level for 30 years. Under the Conservatives' economic policy, interest rates hit 15 per cent. Today, at 3.75 per cent., interest rates are at their lowest levels for more than 40 years. Today, we have more people in work than ever before. Some 250,000 jobs have been created in the past year and approaching half of them were in the private sector. So much for the suggestion that the growth was all in the public sector and that we are ignoring the private sector. The fact is that Labour is promoting, encouraging and supporting growth across the economy.
	We also know[Interruption.] It is no use Opposition Members getting so agitated about that analysis because under the Conservatives businesses went to the wall, pledges on tax were broken, there was negative equity in homes and the public felt hurt and lectured at by a Government who seemed arrogantnot my words, but those of the right hon. Member for Chingford and Woodford Green. Will he deny that that is how he described his Government's economic record? The fact of the matter is that the Conservatives opposed the independence of the Bank of England, the fiscal rules and the new deal funded from the windfall levy, as did the Liberal Democrats. They opposed a national minimum wage, more help for families through tax credits and help for the poorest pensioners. Yet they have the nerve to come to the House and claim to be the friends of pensioners.

Alex Salmond: rose

Paul Boateng: It was under the Conservative party that pensioners suffered to the extent that they did. It now wants to cut spending by 20 per cent. across the board.
	On enterprises, small businesses employ almost 400,000 people more than they did in 1997. Some 1.5 million more people are in work.

Alex Salmond: rose

Mr. Speaker: Order. The right hon. Gentleman is not giving way.

Alex Salmond: It must be the noise because I know that the Chief Secretary would want to give way if he could only hear my intervention.

Paul Boateng: I do not want to give way.
	Some 70 per cent. of those people are in full-time jobs and 70 per cent. are in the private sector. As the Organisation for Economic Co-operation and Development made clear, the UK is the best place to start out and to succeed in business. That is the result of the steps taken by my right hon. Friend the Chancellor.
	We are doing more. We are improving the research and development tax credits as a result of talking to the CBI and the TUC. Industry is working together, management and workers alike. As Digby Jones recognised, in a difficult business climate with little room for manoeuvre, the Chancellor has remained focused on improving the overall performance of the economy. That is our intention: to continue to improve access to finance for small businesses and to cut red tape and the costs of entering the VAT system.
	International comparisons consistently show that the regulatory cost of starting a business in the UK is one of the lowestit is 30 times less than that of our European competitors. The former right hon. Member for Huntingdon told the Tory party conference in 1992:
	You need 28 separate licences, certificates and registrations just to start a business.
	It now takes a day to set up a business and it costs 85. No more 28 licences under Labour. In the EU it takes an average of 11 weeks to set up a new business and costs more than 1,000. We have cut form filling and red tape for 700,000 small businesses with our new flat-rate VAT scheme. We have saved 150,000 small businesses up to 180 million a year by raising the statutory audit requirement to a turnover of 1 million. And it gets better. I commend this Budget to the House.

Question put:
	The House divided: Ayes 322, Noes 187.

Question accordingly agreed to.
	Resolved,
	(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
	(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide
	(a) for zero-rating or exempting a supply, acquisition or importation;
	(b) for refunding an amount of tax;
	(c) for any relief, other than a relief that
	(i) so far as it is applicable to goods, applies to goods of every description, and
	(ii) so far as it is applicable to services, applies to services of every description.
	Mr. Speaker then, pursuant to Standing Order No. 51(3)(Ways and Means Motions), put forthwith the Questions necessary to dispose of the further motions.
	1. Rates of tobacco products duty
	Resolved,
	That
	(1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted
	
		Table
		
			  
			 1. Cigarettes An amount equal to 22 per cent of the retail price plus 96.88 per thousand cigarettes. 
			 2. Cigars 141.10 per kilogram. 
			 3. Hand-rolling tobacco 101.42 per kilogram. 
			 4. Other smoking tobacco and chewing tobacco 62.03 per kilogram. 
		
	
	(2) This Resolution shall have effect as from 6 o'clock in the evening of 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	2. Rate of duty on beer
	Resolved,
	That
	(1) In section 36(1AA)(a) of the Alcoholic Liquor Duties Act 1979, for 11.89 there shall be substituted 12.22.
	(2) This Resolution shall have effect as from midnight on 13th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	3. Rates of duty on wine and made-wine
	Resolved,
	That
	(1) For Part 1 of the Table of rates of duty in Schedule 1 to the Alcoholic Liquor Duties Act 1979 there shall be substituted
	Part 1Wine and made-wine of a strength not exceeding22 per cent
	
		
			 Description of wine or made-wine Rates of duty per hectolitre 
			   
			 Wine or made-wine of a strength not exceeding 4 per cent 48.91 
			 Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent 67.25 
			 Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not sparkling 158.69 
			 Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent 166.70 
			 Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent 220.54 
			 Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent 211.58 
		
	
	(2) This Resolution shall have effect as from midnight on 13th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	4. Hydrocarbon oil duties (rates)
	Resolved,
	That provision may be made altering rates of excise duty under the Hydrocarbon Oil Duties Act 1979.
	5. Hydrocarbon oil duties (rates)
	Resolved,
	That provision may be made altering rates of excise duty under the Hydrocarbon Oil Duties Act 1979.
	6. Hydrocarbon oil duties (rebates)
	Motion made, and Question put,
	That
	(1) In section 11(1) of the Hydrocarbon Oil Duties Act 1979
	(a) in paragraph (a), for 0.0274 there shall be substituted 0.0382,
	(b)in paragraph (b), for 0.0313 there shall be substituted 0.0422, and
	(c) in paragraph (ba), for 0.0313 there shall be substituted 0.0422.
	(2) In section 14(1) of that Act, for 0.0274 there shall be substituted 0.0382.
	(3) This Resolution shall have effect as from 6 o'clock in the evening of 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	The House divided: Ayes 318, Noes 184.

Question accordingly agreed to.
	7. Liability to general betting duty of betting exchanges
	Resolved,
	That
	(1) Immediately before section 5B of the Betting and Gaming Duties Act 1981 there shall be inserted
	5A Betting exchanges
	(1) This section applies where
	(a) one person makes a bet with another person using facilities provided by a third person in the course of a business, and
	(b) that business is one that does not involve the provision of premises for use by persons making or taking bets.
	(2) General betting duty shall be charged on the amounts (commission charges) that the parties to the bet are charged, whether by deduction from winnings or otherwise, for using those facilities.
	(3) No deductions shall be allowed from commission charges.
	(4) The amount of duty charged under this section in respect of bets determined in an accounting period shall be 15 per cent of the commission charges relating to those bets.
	(5) For the purposes of this section, and section 5B(4) so far as relating to this section, a person who arranges for facilities relating to a bet to be provided by another person shall be treated as providing them himself (and the other person shall not)..
	(2) In section 5B
	(a) for subsection (1) there shall be substituted
	(1) All general betting duty chargeable in respect of
	(a) bets made in an accounting period, or
	(b) in the case of duty chargeable under section 5AB, bets determined in an accounting period,
	shall become due at the end of that period.;
	(b) in subsection (4), after section 4(1) to (3) there shall be inserted or 5AB.
	(3) In section 5C
	(a) in subsection (1), after in the course of a business there shall be inserted , other than a betting-exchange business,;
	(b) at the end of that subsection there shall be inserted
	In paragraph (a) betting-exchange business means a business such as is mentioned in section 5AB(1).;
	(c) subsections (2) and (3) and, in subsection (4), the words In the case of a bet which is excluded from subsection (2) by virtue of subsection (3), shall be omitted.
	(4) The amendments made by this Resolution apply in relation to any accounting period beginning on or after 1st June 2003.
	(5) Those amendments shall not apply in relation to a bet (a straddling bet) that is
	(a) made, using facilities provided by a person (the broker), in an accounting period of the broker beginning before 1st June 2003, but
	(b) not determined until an accounting period of the broker beginning on or after that date.
	(6) Any winnings paid in respect of a straddling bet to which section 5AB of the Betting and Gaming Duties Act 1981 would apply but for paragraph (5) above shall be treated for the purposes of that Act as paid in the broker's accounting period in which the bet was made (the earlier accounting period).
	(7) Paragraph (6) above shall not have effect to reduce the general betting duty payable by the broker for the earlier accounting period; but the amount of the reduction that would (but for this paragraph) have been made for that period shall be set against any liability of the broker to general betting duty for accounting periods in the following three years, taking earlier periods before later ones until the amount is exhausted.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	8. General betting duty (on-course bets)
	Resolved,
	That provision may be made restricting the definition of on-course bet in Part 1 of the Betting and Gaming Duties Act 1981.
	9. Bingo duty
	Resolved,
	That provision may be made about bingo duty.
	10. Amusement machines not operated by coins or tokens
	Resolved,
	That provision may be made
	(a) extending the definition of amusement machine for the purposes of the Betting and Gaming Duties Act 1981;
	(b) extending the definition of gaming machine for the purposes of section 23 of the Value Added Tax Act 1994.
	11. Vehicle excise duty (rates)
	Motion made, and Question put,
	That
	(1) In paragraph 1 of Schedule 1 to the Vehicle Excise and Registration Act 1994
	(a) in sub-paragraph (2) for 160 there shall be substituted 165;
	(b) in sub-paragraph (2A) for 105 there shall be substituted 110.
	(2) For the Table in paragraph 1B of that Schedule there shall be substituted
	
		
			 CO2 emissions figure  Rate 
			 (1) (2) (3) (4) (5) 
			 Exceeding Not exceeding Reduced rate Standard Rate Premium rate 
			 g/km g/km 
			  100 55 65 75 
			 100 120 65 75 85 
			 120 150 95 105 115 
			 150 165 115 125 135 
			 165 185 135 145 155 
			 185  155 160 165 
		
	
	(3) In paragraph 1J of that Schedule
	(a) in paragraph (a) for 160 there shall be substituted 165;
	(b) in paragraph (b) for 105 there shall be substituted 110.
	(4) This Resolution shall apply to any licence taken out on or after 17th April 2003 for a period beginning on or after 1st May 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	The House divided: Ayes 369, Noes 134.

Question accordingly agreed to.
	12. Vehicle excise duty (tractive units)
	Resolved,
	That
	(1) After section 15 of the Vehicle Excise and Registration Act 1994 there shall be inserted
	15A Exception for tractive units from charge at higher rate
	(1) Where
	(a) a vehicle licence has been taken out for a tractive unit, and
	(b) the licence was taken out at a rate of vehicle excise duty applicable to a tractive unit which is to be used with semi-trailers with a minimum number of axles,
	duty at a higher rate does not become chargeable under section 15 by reason only that while the licence is in force the tractive unit is used with a semi-trailer with fewer axles than that minimum number, if the condition in subsection (2) is satisfied.
	(2) The condition is that the rate of duty at which the licence was taken out is equal to or exceeds the rate which would have been applicable if the revenue weight of the tractive unit had been a weight equal to the actual laden weight, at the time of the use, of the articulated vehicle consisting of the tractive unit and the semi-trailer..
	(2) Section 16 of that Act shall cease to have effect.
	(3) This Resolution has effect in relation to the use of a tractive unit on or after 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	13. Value added tax (requirement of evidence or security)
	Resolved,
	That
	(1) The Value Added Tax Act 1994 shall be amended in accordance with paragraphs (2) to (7) below.
	(2) In section 24(6)(a), after documents there shall be inserted or other information.
	(3) In paragraph 4 of Schedule 11, for sub-paragraph (1) there shall be substituted
	(1) The Commissioners may, as a condition of allowing or repaying input tax to any person, require the production of such evidence relating to VAT as they may specify.
	(1A) If they think it necessary for the protection of the revenue, the Commissioners may require, as a condition of making any VAT credit, the giving of such security for the amount of the payment as appears to them appropriate..
	(4) For sub-paragraph (2) of that paragraph there shall be substituted
	(2) If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from
	(a) the taxable person, or
	(b) any person by or to whom relevant goods or services are supplied.
	(3) In sub-paragraph (2) above relevant goods or services means goods or services supplied by or to the taxable person.
	(4) Security under sub-paragraph (2) above shall be of such amount, and shall be given in such manner, as the Commissioners may determine.
	(5) The powers conferred on the Commissioners by sub-paragraph (2) above are without prejudice to their powers under section 48(7)..
	(5) In section 72(11) after supplies there shall be inserted or is supplied with.
	(6) In section 83(l) for paragraph 4(2) there shall be substituted paragraph 4(1A), (2) or (3).
	(7) In section 84, after subsection (4D) there shall be inserted
	(4E) Where an appeal is brought against a requirement imposed under paragraph 4(2)(b) of Schedule 11 that a person give security, the tribunal shall allow the appeal unless the Commissioners satisfy the tribunal that
	(a) there has been an evasion of, or an attempt to evade, VAT in relation to goods or services supplied to or by that person, or
	(b) it is likely, or without the requirement for security it is likely, that VAT in relation to such goods or services will be evaded.
	(4F) A reference in subsection (4E) above to evading VAT includes a reference to obtaining a VAT credit that is not due or a VAT credit in excess of what is due..
	(8) This Resolution shall come into force on 10th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	14. Joint and several liability for unpaid VAT of another trader
	Resolved,
	That
	(1) After section 77 of the Value Added Tax Act 1994 there shall be inserted
	Liability for unpaid VAT of another
	77A Joint and several liability of traders in supply chain where tax unpaid
	(1) This section applies to goods of any of the following descriptions
	(a) telephones and any other equipment, including parts and accessories, made or adapted for use in connection with telephones or telecommunication;
	(b) computers and any other equipment, including parts, accessories and software, made or adapted for use in connection with computers or computer systems.
	(2) Where
	(a) a taxable supply of goods to which this section applies has been made to a taxable person, and
	(b) at the time of the supply the person knew or had reasonable grounds to suspect that some or all of the VAT payable in respect of that supply, or on any previous or subsequent supply of those goods, would go unpaid,
	the Commissioners may serve on him a notice specifying the amount of the VAT so payable that is unpaid, and stating the effect of the notice.
	(3) The effect of a notice under this section is that
	(a) the person served with the notice, and
	(b) the person liable, apart from this section, for the amount specified in the notice,
	are jointly and severally liable to the Commissioners for that amount.
	(4) For the purposes of subsection (2) above the amount of VAT that is payable in respect of a supply is the lesser of
	(a) the amount chargeable on the supply, and
	(b) the amount shown as due on the supplier's return for the prescribed accounting period in question (if he has made one) together with any amount assessed as due from him for that period (subject to any appeal by him).
	(5) The reference in subsection (4)(b) above to assessing an amount as due from a person includes a reference to the case where, because it is impracticable to do so, the amount is not notified to him.
	(6) For the purposes of subsection (2) above, a person shall be presumed to have reasonable grounds for suspecting matters to be as mentioned in paragraph (b) of that subsection if the price payable by him for the goods in question
	(a) was less than the lowest price that might reasonably be expected to be payable for them on the open market, or
	(b) was less than the price payable on any previous supply of those goods.
	(7) The presumption provided for by subsection (6) above is rebuttable on proof that the low price payable for the goods was due to circumstances unconnected with failure to pay VAT.
	(8) Subsection (6) above is without prejudice to any other way of establishing reasonable grounds for suspicion.
	(9) The Treasury may by order amend subsection (1) above; and any such order may make such incidental, supplemental, consequential or transitional provision as the Treasury think fit.
	(10) For the purposes of this section
	(a) goods includes services;
	(b) an amount of VAT counts as unpaid only to the extent that it exceeds the amount of any refund due..
	(2) After paragraph (r) of section 83 of that Act there shall be inserted
	(ra) any liability arising by virtue of section 77A;.
	(3) This Resolution shall come into force on 10th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	15. Value added tax (face-value vouchers)
	Resolved,
	That
	(1) After section 51A of the Value Added Tax Act 1994 there shall be inserted
	51B Face-value vouchers
	Schedule 10A shall have effect with respect to face-value vouchers..
	(2) After Schedule 10 to that Act there shall be inserted
	Schedule 10A
	Face-value vouchers
	Meaning of face-value voucher etc
	1 (1) In this Schedule face-value voucher means a token, stamp or voucher (whether in physical or electronic form) that represents a right to receive goods or services to the value of an amount stated on it or recorded in it.
	(2) References in this Schedule to the face value of a voucher are to the amount referred to in sub-paragraph (1) above.
	Nature of supply
	2 The issue of a face-value voucher, or any subsequent supply of it, is a supply of services for the purposes of this Act.
	Treatment of credit vouchers
	3 (1) This paragraph applies to a face-value voucher issued by a person who
	(a) is not a person from whom goods or services may be obtained by the use of the voucher, and
	(b) undertakes to give complete or partial reimbursement to any such person from whom goods or services are so obtained.
	Such a voucher is referred to in this Schedule as a credit voucher.
	(2) The consideration for any supply of a credit voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the voucher.
	(3) Sub-paragraph (2) above does not apply if any of the persons from whom goods or services are obtained by the use of the voucher fails to account for any of the VAT due on the supply of those goods or services to the person using the voucher to obtain them.
	Treatment of retailer vouchers
	4 (1) This paragraph applies to a face-value voucher issued by a person who
	(a) is a person from whom goods or services may be obtained by the use of the voucher, and
	(b) if there are other such persons, undertakes to give complete or partial reimbursement to those from whom goods or services are so obtained.
	Such a voucher is referred to in this Schedule as a retailer voucher.
	(2) The consideration for the issue of a retailer voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the voucher.
	(3) Sub-paragraph (2) above does not apply if
	(a) the voucher is used to obtain goods or services from a person other than the issuer, and
	(b) that person fails to account for any of the VAT due on the supply of those goods or services to the person using the voucher to obtain them.
	(4) Any supply of a retailer voucher subsequent to the issue of it shall be treated in the same way as the supply of a voucher to which paragraph 6 applies.
	Treatment of postage stamps
	5 The consideration for the supply of a face-value voucher that is a postage stamp shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the stamp.
	Treatment of other kinds of face-value voucher
	6 (1) This paragraph applies to a face-value voucher that is not a credit voucher, a retailer voucher or a postage stamp.
	(2) A supply of such a voucher is chargeable at the rate in force under section 2(1) (standard rate) except where sub-paragraph (3), (4) or (5) below applies.
	(3) Where the voucher is one that can only be used to obtain goods or services in one particular non-standard rate category, the supply of the voucher falls in that category.
	(4) Where the voucher is used to obtain goods or services all of which fall in one particular non-standard rate category, the supply of the voucher falls in that category.
	(5) Where the voucher is used to obtain goods or services in a number of different rate categories
	(a) the supply of the voucher shall be treated as that many different supplies, each falling in the category in question, and
	(b) the value of each of those supplies shall be determined on a just and reasonable basis.
	Vouchers supplied free with other goods or services
	7 Where
	(a) a face-value voucher (other than a postage stamp) and other goods or services are supplied to the same person in a composite transaction, and
	(b) the total consideration for the supplies is no different, or not significantly different, from what it would be if the voucher were not supplied,
	the supply of the voucher shall be treated as being made for no consideration.
	Interpretation
	8 (1) In this Schedule
	credit voucher has the meaning given by paragraph 3(1) above;
	face value has the meaning given by paragraph 1(2) above;
	face value voucher has the meaning given by paragraph 1 (1) above;
	retailer voucher has the meaning given by paragraph 4(1) above.
	(2) For the purposes of this Schedule
	(a) the rate categories of supplies are
	(i) supplies chargeable at the rate in force under section 2(1) (standard rate),
	(ii) supplies chargeable at the rate in force under section 29A (reduced rate),
	(iii) zero-rated supplies, and
	(iv) exempt supplies;
	(b) the non-standard rate categories of supplies are those in sub-paragraphs (ii), (iii) and (iv) of paragraph (a) above;
	(c) goods or services are in a particular rate category if a supply of those goods or services falls in that category.
	(3) A reference in this Schedule to a voucher being used to obtain goods or services includes a reference to the case where it is used as part-payment for those goods or services..
	(3) Paragraph 5 of Schedule 6 to that Act shall be omitted.
	(4) The amendments made by this Resolution shall apply to supplies of tokens, stamps or vouchers issued on or after 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	16. Value added tax (supplies arising from prior grant of fee simple)
	Resolved,
	That
	(1) After section 96(10A) of the Value Added Tax Act 1994 there shall be inserted
	(10B) Notwithstanding subsection (10A) above
	(a) item 1 of Group 1 of Schedule 9 does not make exempt any supply that arises for the purposes of this Act from the prior grant of a fee simple falling within paragraph (a) of that item; and
	(b) that paragraph does not prevent the exemption of a supply that arises for the purposes of this Act from the prior grant of a fee simple not falling within that paragraph..
	(2) This Resolution shall apply in relation to any supply that arises for the purposes of the Value Added Tax Act 1994 from the prior grant of a fee simple made on or after 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	17. Value added tax (business gifts)
	Resolved,
	That provision may be made amending paragraph 5 of Schedule 4 to the Value Added Tax Act 1994 so far as relating to business gifts.
	18. Value added tax (non-business use of business property)
	Resolved,
	That
	(1) After sub-paragraph (4) of paragraph 5 of Schedule 4 to the Value Added Tax Act 1994 there shall be inserted
	(4A) Notwithstanding paragraph 9(1) below, sub-paragraph (4) above does not apply to
	(a) any interest in land,
	(b) any building or part of a building,
	(c) any civil engineering work or part of such a work, or
	(d) any goods incorporated or to be incorporated in a building or civil engineering work (whether by being installed as fixtures or fittings or otherwise)..
	(2) This Resolution shall have effect on and after 9th April 2003.
	(3) This Resolution shall not apply in relation to any asset in respect of which the person in question or any of his predecessors became entitled before that date to a credit or repayment as mentioned in paragraph 5(5)(a) or 5(5)(b) of Schedule 4 to the Value Added Tax Act 1994.
	(4) In paragraph (3) above
	(a) the person in question means the person carrying on the business referred to in sub-paragraph (4) of paragraph 5 of that Schedule;
	(b) predecessor has the same meaning as in that paragraph;
	(c) the reference to an asset is to anything falling within any of paragraphs (a) to (d) of the sub-paragraph (4A) inserted into that paragraph by paragraph (1) above.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

19. Value Added Tax (Special Accounting Scheme)

Motion made, and Question put,
	That
	(1) The Value Added Tax Act 1994 shall be amended as follows.
	(2) After section 3 there shall be inserted
	3A Supply of electronic services in member States: special accounting scheme
	(1) Schedule 3B (scheme enabling persons who supply electronically supplied services in any member State, but who are not established in a member State, to account for and pay VAT in the United Kingdom on those supplies) has effect.
	(2) The Treasury may by order amend Schedule 3B.
	(3) The power of the Treasury by order to amend Schedule 3B includes power to make such incidental, supplemental, consequential and transitional provision in connection with any amendment of that Schedule as they think fit..
	(3) In Schedule 1, in paragraph 13, at the end there shall be inserted
	(8) This paragraph is subject to paragraph 18 of Schedule 3B (cancellation of registration under this Schedule of persons seeking to be registered under that Schedule, etc)..
	(4) After Schedule 3A there shall be inserted
	SCHEDULE 3BSection 3ASupply of electronic services in member States: special accounting schemePart 1RegistrationThe register
	1 Persons registered under this Schedule are to be registered in a single register kept by the Commissioners for the purposes of this Schedule.Persons who may be registered
	2(1) A person may be registered under this Schedule if he satisfies the following conditions.
	(2) Condition 1 is that the person makes or intends to make qualifying supplies in the course of a business carried on by him.
	(3) Condition 2 is that the person has neither his business establishment nor a fixed establishment in the United Kingdom or in another member State in relation to any supply of goods or services.
	(4) Condition 3 is that the person is not
	(a) registered under this Act,
	(b) identified for the purposes of VAT in accordance with the law of another member State, or
	(c) registered under an Act of Tynwald for the purposes of any tax imposed by or under an Act of Tynwald which corresponds to VAT.
	(5) Condition 4 is that the person
	(a) is not required to be registered or identified as mentioned in condition 3, or
	(b) is required to be so registered or identified, but solely by virtue of the fact that he makes or intends to make qualifying supplies.
	(6) Condition 5 is that the person is not identified under any provision of the law of another member State which implements Article 26c.
	(7) In this Schedule, Article 26c means Article 26c of the 1977 VAT Directive (which is inserted by Article 1(3) of the 2002 VAT Directive).
	(8) References in this Schedule to a person's being registered under this Act do not include a reference to that person's being registered under this Schedule.Qualifying supplies
	3 In this Schedule, qualifying supply means a supply of electronically supplied services (within the meaning of paragraph 7C of Schedule 5) to a person who
	(a) belongs in the United Kingdom or another member State, and
	(b) receives those services otherwise than for the purposes of a business carried on by him.Registration request
	4 (1) If a person
	(a) satisfies the Commissioners that the conditions in paragraph 2 above are satisfied in his case, and
	(b) makes a request in accordance with this paragraph (a registration request),
	the Commissioners must register him under this Schedule.
	(2) Sub-paragraph (1) above is subject to paragraph 9 below.
	(3) A registration request must contain the following particulars
	(a) the name of the person making the request;
	(b) his postal address;
	(c) his electronic addresses (including any websites);
	(d) where he has been allocated a number by the tax authorities in the country in which he belongs, that number;
	(e) the date on which he began, or intends to begin, making qualifying supplies.
	(4) A registration request must include a statement that the person making the request is not
	(a) registered under this Act,
	(b) identified for the purposes of VAT in accordance with the law of another member State, or
	(c) registered under an Act of Tynwald for the purposes of any tax imposed by or under an Act of Tynwald which corresponds to VAT.
	(5) A registration request must be made by such electronic means, and in such manner, as the Commissioners may direct or may by regulations prescribe.Date on which registration takes effect
	5 (1) Where a person is registered under this Schedule, his registration takes effect
	(a) on the date on which his registration request is made, or
	(b) on such earlier or later date as may be agreed between him and the Commissioners.
	(2) For the purposes of sub-paragraph (1) above
	(a) no registration is to take effect before 1st July 2003, and
	(b) registration requests made before that date are to be treated as if they were made on that date.Registration number
	6 On registering a person under this Schedule, the Commissioners must
	(a) allocate a registration number to him, and
	(b) notify him electronically of the number.Obligation to notify changes
	7 (1) A person who has made a registration request must notify the Commissioners if subsequently
	(a) there is a change in any of the particulars contained in his request in accordance with paragraph 4(3) above,
	(b) he ceases to make, or to have the intention of making, qualifying supplies, or
	(c) he ceases to satisfy the conditions in any of sub-paragraphs (3) to (6) of paragraph 2 above.
	(2) A notification under this paragraph must be given within the period of 30 days beginning with the date of the change of particulars or of the cessation.
	(3) A notification under this paragraph must be given by such electronic means, and in such manner, as the Commissioners may direct or may by regulations prescribe.Cancellation of registration
	8 (1) The Commissioners must cancel a person's registration under this Schedule if
	(a) he notifies them that he has ceased to make, or to have the intention of making, qualifying supplies,
	(b) they otherwise determine that he has ceased to make, or to have the intention of making, qualifying supplies,
	(c) he notifies them that he has ceased to satisfy the conditions in any of sub-paragraphs (3) to (6) of paragraph 2 above,
	(d) they otherwise determine that he has ceased to satisfy any of those conditions, or
	(e) they determine that he has persistently failed to comply with his obligations under this Schedule.
	(2) In a case falling within sub-paragraph (1)(a) or (c) above, cancellation of a person's registration under this paragraph takes effect
	(a) on the date on which the notification is received, or
	(b) on such earlier or later date as may be agreed between him and the Commissioners.
	(3) In a case falling within sub-paragraph (1)(b), (d) or (e) above, cancellation of a person's registration under this paragraph takes effect
	(a) on the date on which the determination is made, or
	(b) on such earlier or later date as the Commissioners may in his particular case direct.Registration after cancellation for persistent default
	9 (1) The Commissioners
	(a) are not required by paragraph 4(1) above to register a person under this Schedule if he is a persistent defaulter, but
	(b) shall have the power to do so.
	(2) In this paragraph, persistent defaulter means a person
	(a) whose previous registration under this Schedule has been cancelled under paragraph 8(1)(e) above (persistent failure to comply with obligations under this Schedule), or
	(b) who has been excluded from the identification register under any provision of the law of another member State which implements Article 26c(B)(4)(d) of the 1977 VAT Directive (persistent failure to comply with rules concerning the special scheme).Part 2Obligations following registration, etcLiability for VAT
	10 (1) A person is liable to pay VAT under and in accordance with this Schedule if
	(a) he makes a qualifying supply, and
	(b) he is registered under this Schedule when he makes the supply.
	(2) The amount of VAT which a person is liable to pay by virtue of this Schedule on any qualifying supply is to be determined in accordance with sub-paragraphs (3) and (4) below.
	(3) If the qualifying supply is treated as made in the United Kingdom, the amount is the amount of VAT that would have been charged on the supply under this Act if the person had been registered under this Act when he made the supply.
	(4) If the qualifying supply is treated as made in another member State, the amount is the amount of VAT that would have been charged on the supply in accordance with the law of that member State if the person had been identified for the purposes of VAT in that member State when he made the supply.
	(5) Where a person is liable to pay VAT by virtue of this Schedule
	(a) any amount falling to be determined in accordance with sub-paragraph (3) above is to be regarded for the purposes of this Act as VAT charged in accordance with this Act, and
	(b) any amount falling to be determined in accordance with sub-paragraph (4) above in relation to another member State is to be regarded for those purposes as VAT charged in accordance with the law of that member State.Obligation to submit special accounting returns
	11(1) A person who is, or has been, registered under this Schedule must submit a return (a special accounting return) to the Controller for each reporting period.
	(2) Each quarter for the whole or any part of which a person is registered under this Schedule is a reporting period in the case of that person.
	(3) The special accounting return must state the person's registration number.
	(4) For each member State in which the person is treated as having made qualifying supplies for the reporting period, the special accounting return must specify
	(a) the total value of his qualifying supplies treated as made in that member State in that period, apart from the VAT which he is liable to pay by virtue of this Schedule in respect of those supplies,
	(b) the rate of VAT applicable to those supplies by virtue of sub-paragraph (3) or (4) (as the case may be) of paragraph 10 above, and
	(c) the total amount of VAT payable by him by virtue of this Schedule in respect of those supplies in that period.
	(5) The special accounting return must state the total amount of VAT which the person is liable to pay by virtue of this Schedule in respect of all qualifying supplies treated as made by him in all member States in the reporting period.
	(6) If a person is registered under this Schedule for part only of a reporting period, references in this paragraph to his qualifying supplies in that period are references to his qualifying supplies in that part of that period.
	(7) In this Schedule, the Controller means the Controller, Customs and Excise Value Added Tax Central Unit.Further obligations with respect to special accounting returns
	12(1) A special accounting return must set out in sterling the amounts referred to in paragraph 11 above.
	(2) Any conversion from one currency into another for the purposes of sub-paragraph (1) above shall be made by using the exchange rates published by the European Central Bank
	(a) for the last day of the reporting period to which the special accounting return relates, or
	(b) if no such rate is published for that day, for the next day for which such a rate is published.
	(3) A special accounting return must be submitted to the Controller within the period of 20 days after the last day of the reporting period to which it relates.
	(4) A special accounting return must be submitted by such electronic means, and in such manner, as the Commissioners may direct or may by regulations prescribe.Payment of VAT
	13 (1) A person who is required to submit a special accounting return must, at the same time as he submits the return, pay to the Controller in sterling the amount referred to in paragraph 11(5) above in respect of the reporting period to which the return relates.
	(2) A payment under this paragraph must be made in such manner as the Commissioners may direct or may by regulations prescribe.Obligations to keep and produce records
	14 (1) A person must keep records of the transactions which he enters into for the purposes of, or in connection with, qualifying supplies made by him at any time when he is registered under this Schedule.
	(2) The records to be kept must be such as will enable the tax authorities for the member State in which a qualifying supply is treated as made to determine whether any special accounting return which is submitted in respect of that supply is correct.
	(3) Any records required to be kept must be made available
	(a) to the tax authorities for the member State in which the qualifying supply to which the records relate was treated as made, if they so request, or
	(b) to the Commissioners, if they so request.
	(4) Records must be made available electronically under sub-paragraph (3) above.
	(5) The records relating to a transaction must be maintained for a period of ten years beginning with the 1st January following the date on which the transaction was entered into.Commissioners' power to request production of records
	15 (1) The Commissioners may request a person to make available to them electronically records of the transactions entered into by him for the purposes of, or in connection with, qualifying supplies to which this paragraph applies.
	(2) This paragraph applies to qualifying supplies which
	(a) are treated as made in the United Kingdom, and
	(b) are made by the person while he is identified under any provision of the law of another member State which implements Article 26c.Part 3Understatements and overstatements of UK VATUnderstatement or overstatement of UK VAT in special scheme return
	16(1) If the Commissioners consider that a person who is or has been a participant in the special scheme has submitted a special scheme return which understates his liability to UK VAT, they may give him a notice
	(a) identifying the return in which they consider that the understatement was made,
	(b) specifying the amount by which they consider that the person's liability to UK VAT has been understated, and
	(c) requesting him to pay that amount to the Controller within the period of 30 days beginning with the date on which the notice is given.
	(2) If the Commissioners consider that a person who is or has been a participant in the special scheme has submitted a special scheme return which overstates his liability to UK VAT, they may give him a notice
	(a) identifying the return in which they consider that the overstatement was made, and
	(b) specifying the amount by which they consider that the person's liability to UK VAT has been overstated.
	(3) Where the Commissioners give a person a notice under sub-paragraph (2) above, they are liable to pay him the amount specified in the notice.
	(4) No notice under this paragraph may be given more than 3 years after the end of the period for which the special scheme return in question was made.
	(5) In this Schedule, participant in the special scheme means a person who
	(a) is registered under this Schedule, or
	(b) is identified under any provision of the law of another member State which implements Article 26c.
	(6) In this paragraph
	special scheme return means
	(a) a special accounting return; or
	(b) a value added tax return submitted to the tax authorities of another member State;
	UK VAT means VAT which a person is liable to pay (whether in the United Kingdom or another member State) in respect of qualifying supplies treated as made in the United Kingdom at a time when he is or was a participant in the special scheme;
	value added tax return, in relation to another member State, means any value added tax return required to be submitted under any provision of the law of that member State which implements Article 26c(B)(5) of the 1977 VAT Directive.Part 4Application of provisions relating to VAT
	Registration under this Act
	17 Notwithstanding any provision in this Act to the contrary, a participant in the special scheme is not required to be registered under this Act by virtue of making qualifying supplies.De-registration
	18 Where a person who is registered under Schedule 1 satisfies the Commissioners that he intends to apply for
	(a) registration under this Schedule, or
	(b) identification under any provision of the law of another member State which implements Article 26c,
	they may, if he so requests, cancel his registration under Schedule 1 with effect from the day on which the request is made or from such later date as may be agreed between him and the Commissioners.
	VAT representatives
	19 Section 48(1) (VAT representatives) does not permit the Commissioners to direct a participant in the special scheme to appoint a VAT representative.Appeals
	20 (1) An appeal shall lie to a tribunal with respect to any of the following
	(a) the registration or cancellation of the registration of any person under this Schedule;
	(b) a decision of the Commissioners to give a notice under sub-paragraph (1) of paragraph 16 above;
	(c) the amount specified in any such notice or in a notice under sub-paragraph (2) of that paragraph.
	(2) Part 5 (appeals), and any orders or regulations under that Part, have effect in relation to an appeal under this paragraph as if it were an appeal under section 83 (but not under any particular paragraph of that section).
	Payments on account of non-UK VAT to other member States
	21 (1) Neither
	(a) paragraph 1(2) of Schedule 11, nor
	(b) section 10 of the Exchequer and Audit Departments Act 1866,
	applies to money or securities for money collected or received for or on account of VAT if required to be paid to another member State by virtue of the VAT Co-operation Regulation.
	(2) In sub-paragraph (1) above, the VAT Co-operation Regulation means the Council Regulation of 27 January 1992 on administrative co-operation in the field of indirect taxation (VAT) (218/92/EEC), as amended by the Council Regulation of 7 May 2002 (792/2002/EC) (which temporarily amends the VAT Co-operation Regulation as regards additional measures regarding electronic commerce).
	Refund of UK VAT
	22(1) The provisions which give effect to the 1986 VAT Refund Directive in the United Kingdom have effect in relation to a participant in the special scheme, but with the following modifications. (2) The provision which gives effect to Article 2(1) of the 1986 VAT Refund Directive (as at 9th April 2003, see regulation 186 of the Value Added Tax Regulations 1995) shall apply in relation to a participant in the special scheme, but only so as to entitle him to a refund of VAT charged on
	(a) goods imported by him into the United Kingdom, and
	(b) supplies made to him in the United Kingdom,
	in connection with the making by him of qualifying supplies while he is a participant in the special scheme.
	(3) The following provisions shall be omitted.
	(4) The first provision is that which gives effect to Article 1(1) of the 1986 VAT Refund Directive, so far as it requires a member State to prevent a person who is deemed to have supplied services in that member State during a period from being granted a refund of VAT for that period (as at 9th April 2003, see regulation 188(2)(b) of the Value Added Tax Regulations 1995).
	(5) The second provision is that which gives effect to Article 2(2) of the 1986 VAT Refund Directive (which permits member States to make refunds conditional upon the granting by third States of comparable advantages regarding turnover taxes: as at 9th April 2003, see regulation 188(1) of the Value Added Tax Regulations 1995).
	(6) The third provision is that which gives effect to Article 2(3) of the 1986 VAT Refund Directive (which permits member States to require the appointment of a tax representative: as at 9th April 2003, see regulation 187 of the Value Added Tax Regulations 1995).
	(7) The fourth provision is that which gives effect to Article 4(2) of the 1986 VAT Refund Directive (which permits member States to provide for the exclusion of certain expenditure and to make refunds subject to additional conditions).
	(8) In this paragraph the 1986 VAT Refund Directive means the Thirteenth Council Directive of 17th November 1986 on the harmonisation of the laws of the member States relating to turnover taxesarrangements for the refund of value added tax to taxable persons not established in Community territory (86/560/ EEC).Part 5Supplementary
	Interpretation
	23(1) In this Schedule
	the 1977 VAT Directive means the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the member States relating to turnover taxescommon system of value added tax: uniform basis of assessment (77/388/EEC);
	the 2002 VAT Directive means the Council Directive of 7 May 2002 amending and amending temporarily the 1977 VAT Directive as regards the value added tax arrangements applicable to radio and television broadcasting services and certain electronically supplied services (2002/38/EC);
	Article 26c has the meaning given by paragraph 2(7);
	the Controller has the meaning given by paragraph 11(7) above;
	participant in the special scheme has the meaning given by paragraph 16(5) above;
	qualifying supply has the meaning given by paragraph 3 above;
	registration number means the number allocated to a person on his registration under this Schedule in accordance with paragraph 6(a) above;
	registration request is to be construed in accordance with paragraph 4(1)(b) above;
	reporting period is to be construed in accordance with paragraph 11(2) above;
	special accounting return is to be construed in accordance with paragraph 11(1) above.
	(2) References in this Schedule to a qualifying supply being treated as made in a member State are references to its being treated as made
	(a) in the United Kingdom, by virtue of any provision which gives effect in the United Kingdom to Article 9(2)(f) of the 1977 VAT Directive (which is inserted by Article 1(1)(b) of the 2002 VAT Directive), or
	(b) in another member State, by virtue of any provision of the law of that member State which gives effect to that Article.
	(3) The provision which, as at 9th April 2003, is to give effect in the United Kingdom to Article 9(2)(f) of the 1977 VAT Directive (as mentioned in sub-paragraph (2)(a) above) is article 16A of the Value Added Tax (Place of Supply of Services) Order 1992 (which is prospectively inserted by article 3 of the Value Added Tax (Place of Supply of Services) (Amendment) Order 2003)..
	(5) The amendments made by this Resolution have effect in relation to qualifying supplies made on or after 1st July 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	 The House divided: Ayes 364, Noes 132.

Question accordingly agreed to.
	20. Stamp duty land tax
	Motion made, and Question put,
	That provision may be made for and in connection with the taxation of transactions involving the acquisition of
	(a) an estate, interest right or power in or over land in the United Kingdom, or
	(b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power.
	The House divided: Ayes 318, Noes 175.

Question accordingly agreed to.

21. Stamp Duty (Withdrawal Of Group Relief)

Resolved,
	That the following provisions shall have effect for the period beginning with 15th April 2003 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973
	(1 ) Section 111 of the Finance Act 2002 shall be amended as follows.
	(2) In subsection (1)(b) for two years there shall be substituted three years.
	(3) In subsection (1)(c)
	(a) in the opening words
	(i) for it ceases there shall be substituted the transferee company ceases, and
	(ii) for it holds there shall be substituted it or a relevant associated company holds;
	(b) in sub-paragraph (i) for to it there shall be substituted to the transferee company; and
	(c) for the closing words there shall be substituted and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed.
	(4) In subsection (3)
	(a) after transferred there shall be inserted to the transferee company, and
	(b) for what the transferee company holds at the time it ceases to be a member there shall be substituted what is held by that company or, as the case may be, that company and any relevant associated companies, at the time it or they cease to be members.
	(5 ) After subsection (4) there shall be inserted
	(4A) In this section relevant associated company, in relation to the transferee company, means a company that
	(a) is a member of the same group as the transferee company immediately before that company ceases to be a member of the same group as the transferor company, and
	(b) ceases to be a member of the same group as the transferor company in consequence of the transferee company so ceasing..
	(6) In paragraph 4(3) of Schedule 34 to the Finance Act 2002, in paragraph (b)
	(a) in the opening words
	(i) for it ceases there shall be substituted the transferee company ceases, and
	(ii) for it holds there shall be substituted it or a relevant associated company (as defined in sub-paragraph (4) below) holds;
	(b) in sub-paragraph (i) for to it there shall be substituted to the transferee company; and
	(c) for the closing words there shall be substituted and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed.
	(7) In the closing words of that sub-paragraph, for the words from as if to the end there shall be substituted as if the transferee had then ceased to be a member of the same group as the transferor company and had then held the estate or interest referred to in paragraph (b)..
	(8) After that sub-paragraph there shall be inserted
	(4) In sub-paragraph (3)(b) relevant associated company, in relation to the transferee company, means a company that is in the same group as the transferee company immediately before the transferee company ceases to be a member of the new group and which ceases to be a member of the new group in consequence of the transferee company so ceasing..
	(9) This Resolution shall apply to instruments executed after 14th April 2003.
	(10) But this Resolution shall not apply to an instrument giving effect to a contract made on or before 9th April 2003, unless
	(a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or
	(b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date.
	(11) This Resolution shall come into force on 15th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.

22. Stamp Duty (Withdrawal Of Relief For Company Acquisitions)

Resolved,
	That the following provisions shall have effect for the period beginning with 15th April 2003 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973
	(1) Section 113 of the Finance Act 2002 shall be amended as follows.
	(2) In subsection (1)(b) for two years there shall be substituted three years.
	(3) In subsection (1)(c)
	(a) in the opening words, after the acquiring company there shall be inserted or a relevant associated company;
	(b) in sub-paragraph (i) for to it there shall be substituted to the acquiring company; and
	(c) for the closing words there shall be substituted and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which section 76 relief was not claimed.
	(4) In subsection (3) for what the acquiring company holds there shall be substituted what is held by that company or, as the case may be, by that company and any relevant associated companies.
	(5) After subsection (3) there shall be inserted
	(3A) In this section relevant associated company, in relation to the acquiring company, means a company
	(a) that is controlled by the acquiring company immediately before the control of that company changes, and
	(b) of which control changes in consequence of the change of control of that company..
	(6) In Schedule 35 to the Finance Act 2002, in paragraphs 3(3)(b) and 4(3)(b)
	(a) in the opening words, after the acquiring company there shall be inserted or a relevant associated company,
	(b) in sub-paragraph (i) for to it there shall be substituted to the acquiring company, and
	(c) for the closing words there shall be substituted and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which section 76 relief was not claimed.
	(7) This Resolution shall apply to instruments executed after 14th April 2003.
	(8) But this Resolution shall not apply to an instrument giving effect to a contract made on or before 9th April 2003, unless
	(a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or
	(b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date.
	(9) This Resolution shall come into force on 15th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.

23. Income Tax (Charge And Rates For 200304)

Motion made, and Question put,
	That income tax shall be charged for the year 2003-04, and for that year
	(a) the starting rate shall be 10%;
	(b) the basic rate shall be 22%;
	(c) the higher rate shall be 40%.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	The House divided: Ayes 309, Noes 171.

Question accordingly agreed to.

24. Indexed Rate Bands For 200304: PAYE Deductions Etc

Resolved,
	That for the year 2003-04 section 1(5A) of the Income and Corporation Taxes Act 1988 shall have effect as if 14th June were substituted for 17th May.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

25. Corporation Tax (Charge And Rate For 2004)

Motion made, and Question put,
	That corporation tax shall be charged for the financial year 2004 at the rate of 30%.
	The House divided: Ayes 337, Noes 13.

Question accordingly agreed to.
	26. Corporation tax (small companies' rate for 2003)
	Resolved,
	That for the financial year 2003
	(a) the small companies' rate shall be 19%, and
	(b) the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be 11/400ths.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	27. Corporation tax (starting rate for 2003)
	Resolved,
	That for the financial year 2003
	(a) the corporation tax starting rate shall be 0%, and
	(b) the fraction mentioned in section 13AA of the Income and Corporation Taxes Act 1988 shall be 19/400ths.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	28. Employment income (provision of services through intermediary)
	Motion made and Question put,
	That
	(1) In section 49(1)(a) of the Income Tax (Earnings and Pensions) Act 2003, for for the purposes of a business carried on by another person there shall be substituted for another person.
	(2) Section 49(2) of that Act shall be omitted.
	(3) In section 56(7) of that Act
	(a) at the end of paragraph (a) there shall be inserted , and;
	(b) paragraph (c) and the word and preceding it shall be omitted.
	(4) This Resolution shall apply in relation to services performed or due to be performed on or after 10th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
	The House divided: Ayes 338, Noes 128.

Question accordingly agreed to.

29. CSOP Schemes

Resolved,
	That
	(1) Section 524 of the Income Tax (Earnings and Pensions) Act 2003 shall be amended as follows.
	(2) For subsection (1)(b) there shall be substituted
	(b) Condition A or B is met..
	(3) For subsections (2) and (3) there shall be substituted
	(2) Condition A is that the option is exercised
	(a) on or after the third anniversary of the date on which it was granted, but
	(b) not later than the tenth anniversary of that date.
	(2A) Condition B is that the option
	(a) is exercised before the third anniversary of the date on which it was granted, and
	(b) is so exercised by virtue of a provision included in the scheme under paragraph 24 of Schedule 4 (exercise of options after ceasing to be director or employee) in circumstances in which subsection (2B) applies.
	(2B) This subsection applies if the individual exercising the option
	(a) has ceased to be a full-time director or qualifying employee of the scheme organiser (or, in the case of a group scheme, a constituent company) because of injury, disability, redundancy or retirement, and
	(b) exercises the option within 6 months of the day on which he ceases to be such a director or employee.
	(2C) In subsection (2B)
	redundancy means redundancy within the meaning of ERA 1996 or ER(NI)O 1996, and
	retirement means retirement on or after reaching the retirement age specified in the scheme..
	(4) For section 525(1)(b) there shall be substituted
	(b) Condition A or B (as set out in section 524(2) or (2A)) is met..
	(5) Section 701(2)(c) of the Income Tax (Earnings and Pensions) Act 2003 shall be amended as follows.
	(6) In sub-paragraph (i), or 4 (approved CSOP schemes) shall be omitted.
	(7) After that sub-paragraph there shall be inserted
	(ia) any shares acquired by the employee (whether or not as a result of the exercise of a right to acquire shares) under a scheme approved under Schedule 4 (approved CSOP schemes), other than shares acquired as a result of the exercise of the right before the third anniversary of the date on which it was granted or later than the tenth anniversary of that date;.
	(8) In sub-paragraph (ii), for such a scheme there shall be substituted a scheme such as is mentioned in sub-paragraph (i) or (ia).
	(9) The amendments made by paragraphs (1) to (4) of this Resolution shall have effect in relation to the exercise of an option on or after 9th April 2003 and the other amendments made by this Resolution shall have effect in relation to shares acquired on or after that date.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

30. Employee Securities And Options

Resolved,
	That provision may be made about securities, and options to acquire securities, acquired pursuant to a right or opportunity available by reason of employment.

31. Payments To Third Parties For The Benefit Of Employees

Resolved,
	That provision (including provision having retrospective effect) may be made about the allowability of deductions for payments made by employers to third parties for the benefit of employees.

32. PAYE (Regulations And Notional Deductions)

Resolved,
	That provision may be made
	(a) as to the matters that may be provided for by regulations under section 684 of the Income Tax (Earnings and Pensions) Act 2003;
	(b) amending section 710 of that Act.

33. Interest On Late Payment Of Amounts Required To Be Deducted From Pay

Resolved,
	That provision may be made about the tax treatment of interest on amounts payable under regulations made under
	(a) section 566 of the Income and Corporation Taxes Act 1988,
	(b) paragraph 6 of Schedule 1 to the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992, or
	(c) section 22 of the Teaching and Higher Education Act 1998 or Article 3 of the Education (Student Support) (Northern Ireland) Order 1998.

34. Corporation Tax (Permanent Establishments Of Non-Resident Companies)

Resolved,
	That provision (including provision having retrospective effect) may be made
	(a) about the taxation of companies that are not resident in the United Kingdom;
	(b) about the taxation of profits of UK-resident companies attributable to permanent establishments elsewhere;
	(c) replacing references to a branch, or branch or agency, of a company with references to a permanent establishment.

35. Life Insurance Policies And Deferred Annuity Contracts

Resolved,
	That provision may be made about chargeable gains on a disposal of, or of an interest in, the rights conferred by a policy of insurance or contract for a deferred annuity on the life of any person.

36. Exercise Of Options And The Market Value Rule

Resolved,
	That provision may be made about the application of section 17(1) of the Taxation of Chargeable Gains Act 1992 in relation to the exercise of options.

37. Chargeable Gains (Earn-Out Rights)

Resolved,
	That provision may be made amending section 138A of the Taxation of Chargeable Gains Act 1992.

38. Chargeable Gains (Attribution Of Gains To Beneficiaries And Settlors)

Resolved,
	That provision may be made amending the Taxation of Chargeable Gains Act 1992 with respect to the attribution of chargeable gains to beneficiaries and settlors.

39. Capital Allowances (Avoidance Affecting Proceeds Of Balancing Event)

Resolved,
	That
	(1) The following section shall be inserted after section 570 of the Capital Allowances Act 2001
	570A Avoidance affecting proceeds of balancing event
	(1) This section applies where an event occurs in relation to an asset (a balancing event) as a result of which a balancing allowance would (but for this section) fall to be made to a person (the taxpayer) under Part 3, 4, 4A, 5 or 10.
	(2) The taxpayer is not entitled to any balancing allowance if, as a result of a tax avoidance scheme, the amount to be brought into account as the proceeds from the event is less than it would otherwise have been.
	(3) In subsection (2) a tax avoidance scheme means a scheme or arrangement the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage by the taxpayer.
	(4) Where this section applies to deny a balancing allowance, the residue of qualifying expenditure immediately after the balancing event is nevertheless calculated as if the balancing allowance had been made.
	(5) In this section as it applies for the purposes of Part 5 (mineral extraction allowances)
	(a) the references to the proceeds from the balancing event that are to be brought into account shall be read as references to the disposal value to be brought into account, and
	(b) the reference to the residue of qualifying expenditure shall be read as a reference to the unrelieved qualifying expenditure..
	(2) This Resolution shall apply in relation to any balancing event (within the meaning of section 570A, inserted by paragraph (1) above) occurring on or after 27th November 2002, except where the event
	(a) occurs in pursuance of a contract entered into before that date, and
	(b) does not occur in consequence of the exercise on or after that date of an option, right of pre-emption or similar right.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

40. Capital Allowances (Expenditure On Software For Sub-Licensing)

Resolved,
	That
	(1) In subsection (1) of section 45 of the Capital Allowances Act 2001, at the end of paragraph (d) there shall be inserted or subsection (4) below.
	(2) After subsection (3) of that section there shall be inserted
	(4) Expenditure on an item within Class C is not first-year qualifying expenditure under this section if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question..
	(3) This Resolution shall apply in relation to expenditure incurred on or after 26th March 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

41. Research And Development (Staffing Costs)

Resolved,
	That provision may be made amending paragraph 5 of Schedule 20 to the Finance Act 2000.

42. Tonnage Tax (Extension Of Capital Allowances Restriction On Lessors Of Ships)

Resolved,
	That provision (including provision having retrospective effect) may be made about the entitlement to capital allowances of a person leasing a ship to a company within tonnage tax.

43. Insurance Companies

Resolved,
	That provision (including provision having retrospective effect) may be made about the taxation of insurance companies, including companies which have ceased to be insurance companies after a transfer of business.

44. Life Policies Etc

Resolved,
	That provision may be made in relation to policies of life insurance, contracts for life annuities and capital redemption policies.

45. Personal Pension Schemes (Limits On Contributions)

Resolved,
	That
	(1) In section 640A(1) of the Income and Corporation Taxes Act 1988 for for the purposes of section 640 above there shall be substituted for the purposes of section 638 or 640 above.
	(2) In determining the permitted maximum for the purposes of any provision of an existing approved scheme designed to meet the requirements of section 638(3) of that Act, a member's net relevant earnings for the year shall be taken to be the amount of his net relevant earnings after applying section 640A of that Act.
	An existing approved scheme means a personal pension scheme approved under Chapter 4 of Part 14 of that Act before 9th April 2003.
	(3) In section 641A(1) of that Act, for A person who pays a contribution under approved personal pension arrangements there shall be substituted An individual who under approved personal pension arrangements made by him pays a contribution.
	(4) This Resolution shall have effect in relation to contributions paid on or after 9th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

46. Charges Under Life Insurance Policies Etc For Exceptional Risk Of Disability

Resolved,
	That provision may be made about variations in insurance policies in connection with exceptional risks of disability.

47. Currency Contracts And Currency Options

Resolved,
	That provision (including provision having retrospective effect) may be made in relation to currency contracts and currency options, as defined in Chapter 2 of Part 4 of the Finance Act 1994.

48. Loan Relationships Etc

Resolved,
	That provision (including provision having retrospective effect) may be made for the purposes of corporation tax in relation to
	(a) loan relationships; and
	(b) other relationships where a company stands, or is treated as standing, in the position of a creditor or debtor in relation to a debt.

49. Derivative Contracts

Resolved,
	That provision may be made for the purposes of corporation tax in relation to derivative contracts.

50. Sale And Repurchase Of Securities

Resolved,
	That provision may be made in relation to the sale and repurchase of securities.

51. Relevant Discounted Securities

Resolved,
	That
	(1) In paragraph 1 of Schedule 13 to the Finance Act 1996
	(a) at the end of sub-paragraph (2)(b) there shall be inserted (no account being taken of any costs incurred in connection with the transfer or redemption of the security or its acquisition);
	(b) in sub-paragraph (3)(a) the words reduced by the amount of any relevant costs shall be omitted;
	(c) sub-paragraph (4) shall be omitted.
	(2) Paragraph 2 of that Schedule shall be omitted.
	(3) In paragraph 6(3) of that Schedule, for paragraphs 1(1) and 2(1) above do not apply there shall be substituted paragraph 1(1) above does not apply.
	(4) Paragraphs 6(4) to (6), 7, 9A and 11 of that Schedule shall be omitted.
	(5) In paragraph 14 of that Schedule
	(a) for the heading there shall be substituted Strips of government securities;
	(b) in sub-paragraphs (2) and (3), the words gilt-edged shall be omitted;
	(c) in sub-paragraph (4), the words after paragraph (c) shall be omitted.
	(6) After that paragraph there shall be inserted
	Strips of government securities: losses
	14A (1) A person who sustains a loss in any year of assessment from the discount on a strip shall be entitled to relief from income tax on an amount of his income for that year equal to the amount of the loss.
	(2) The relief is due only if the person makes a claim before the end of twelve months from the 31st January following that year.
	(3) For the purposes of this paragraph a person sustains a loss from the discount on a strip where
	(a) he transfers the strip or becomes entitled, as the person holding it, to any payment on its redemption, and
	(b) the amount paid by him for the strip exceeds the amount payable on the transfer or redemption (no account being taken of any costs incurred in connection with the transfer or redemption of the strip or its acquisition).
	The loss shall be taken to be equal to the amount of the excess, and to be sustained in the year of assessment in which the transfer or redemption takes place.
	(4)In sub-paragraph (3) above the reference to a transfer in paragraph (a) includes a reference to a deemed transfer under paragraph 14(4) above (and paragraph (b) shall be read accordingly).
	(5) This paragraph does not apply in the case of
	(a) any transfer of a strip for the time being held under a settlement the trustees of which are not resident in the United Kingdom, or
	(b) any redemption of a strip which is so held immediately before its redemption..
	(7) In the definition of strip in paragraph 15(1) of that Schedule, for is a strip of a gilt-edged security there shall be substituted is a strip of a security, or would be if that section had effect with the substitution in subsection (1B) of issued by or on behalf of the government of any territory for issued under the National Loans Act 1968.
	(8) In section 710(3) of the Taxes Act 1988, after paragraph (e) there shall be inserted
	(f) any relevant discounted security within the meaning of Schedule 13 to the Finance Act 1996 (see paragraphs 3 and 14(1) of that Schedule)..
	(9) Subject to paragraph (10) below
	(a) the amendments made by paragraphs (1) and (5)(c) of this Resolution shall apply in relation to costs incurred on or after 27th March 2003;
	(b) the amendments made by paragraphs (2), (3), (4), (6) and (8) of this Resolution shall apply in relation to any loss sustained from the discount on a relevant discounted security transferred or redeemed on or after that date;
	(c) the amendments made by paragraphs (5)(a) and (b) and (7) of this Resolution shall apply in relation to any security acquired on or after that date.
	(10) The amendments mentioned in paragraph (9)(a) and (b) above shall not apply in relation to costs incurred, or losses sustained, on the transfer or redemption of a relevant discounted security if
	(a) the person transferring or redeeming the security held it continuously since a time before 27th March 2003, and
	(b) the security was listed on a recognised stock exchange at any time before that date.
	(11) No losses may be carried forward under paragraph 6(6) of Schedule 13 to the Finance Act 1996 to any year of assessment after 200203.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

52. Foster Carers

Resolved,
	That provision may be made in relation to income tax and capital allowances in the case of individuals who provide foster care.

53. Court Common Investment Funds

Resolved,
	That provision may be made amending section 469A of the Income and Corporation Taxes Act 1988.

54. Rate Of Landfill Tax For Year Beginning1st April 2003

Resolved,
	That
	(1) For the amount specified in subsection (1)(a) of section 42 of the Finance Act 1996, and the corresponding amount in subsection (2) of that section, there shall be substituted 14.
	(2) This Resolution shall apply in relation to taxable disposals made, or treated as made, on or after 1st April 2003 and before 1st April 2004.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

55. Rate Of Landfill Tax From 1st April 2004

Resolved,
	That, in relation to taxable disposals made, or treated as made, on or after 1st April 2004, for the amount specified in subsection (1)(a) of section 42 of the Finance Act 1996, and the corresponding amount in subsection (2) of that section, there shall be substituted 15.

56. Climate Change Levy (Miscellaneous Amendments)

Resolved,
	That provision may be made amending Schedule 6 to the Finance Act 2000 in relation to
	(a) combined heat and power stations;
	(b) taxable supplies made on the basis that they are not taxable;
	(c) supplies of gas that are deemed to be made under paragraph 24 of that Schedule;
	(d) the way in which climate change levy is to be accounted for; and
	(e) assessments of climate change levy.

57. Climate Change Levy (Deemed Supplies Of Electricity)

Resolved,
	That
	(1) In paragraph 5(3) of Schedule 6 to the Finance Act 2000, for paragraph 23(3) there shall be substituted paragraph 20(6)(a), 20B(6)(a), 23(3) or 24.
	(2) This Resolution shall have effect in relation to supplies deemed to be made on or after 31st March 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

58. Climate Change Levy (Electricity From Renewable Sources Etc)

Resolved,
	That
	(1) For sub-paragraphs (6) to (8) of paragraph 20 of Schedule 6 to the Finance Act 2000 there shall be substituted
	(6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then
	(a) in a case where, at the time when the balancing period ends, an averaging period also ends because of sub-paragraph (2)(f) or (g), the supplier is for the purposes of this Schedule deemed to make at that time a taxable supply of a quantity of electricity equal to the excess;
	(b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period..
	(2) For sub-paragraphs (6) to (8) of paragraph 20B of that Schedule there shall be substituted
	(6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then
	(a) in a case where, at the time when the balancing period ends, an averaging period also ends because of sub-paragraph (2)(f) or (g), the supplier is for the purposes of this Schedule deemed to make at that time a taxable supply of a quantity of electricity equal to the excess;
	(b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period..
	(3) The amendment made by paragraph (1) of this Resolution shall have effect where the end of the balancing period referred to in paragraph (a) of the sub-paragraph (6) substituted by that provision falls on or after 31st March 2003.
	(4) The amendment made by paragraph (2) of this Resolution shall have effect where the end of the balancing period referred to in paragraph (a) of the sub-paragraph (6) substituted by that provision falls on or after 1st April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

59. Insurance Premium Tax (Treatment Of Divided Companies)

Resolved,
	That provision may be made for the purposes of insurance premium tax with respect to companies that are divided so that members and creditors of the company have rights only, or primarily, in relation to particular assets of the company.

60. Stamp Duty (Company's Acquisition Of Own Shares)

Resolved,
	That provision may be made amending section 66 of the Finance Act 1986.

61. Companies In Administration

Resolved,
	That provision may be made, for the purposes of corporation tax, about companies which enter, are in or cease to be in administration under Schedule B1 to the Insolvency Act 1986 and companies in respect of which any corresponding event occurs, or which are subject to any corresponding procedure, otherwise than under that Act.

62. Controlled Foreign Companies

Resolved,
	That provision (including provision having retrospective effect) may be made amending Chapter 4 of Part 17 of the Income and Corporation Taxes Act 1988.

63. Deduction Of Tax From Interest (Recognised Clearing Houses Etc)

Resolved,
	That
	(1) Section 349 of the Income and Corporation Taxes Act 1988 shall be amended as follows.
	(2) In subsection (3), at the end there shall be inserted or
	(j) to interest paid by a recognised clearing house or recognised investment exchange carrying on business as provider of a central counterparty clearing service, in the ordinary course of that business, on margin or other collateral deposited with it by users of the service; or
	(k) to interest treated by virtue of section 730A(2)(a) or (b) (repos) as paid by a recognised clearing house or recognised investment exchange in respect of contracts made by it as provider of a central counterparty clearing service..
	(3) In subsection (6), at the appropriate places there shall be inserted
	central counterparty clearing service means the service provided by a clearing house or investment exchange to the parties to a transaction where there are contracts between each of the parties and the clearing house or investment exchange (in place of, or as an alternative to, a contract directly between the parties);;
	recognised clearing house and recognised investment exchange have the same meaning as in the Financial Services and Markets Act 2000 (see section 285 of that Act);.
	(4) The provisions of this Resolution shall have effect in relation to the payment of interest on or after 14th April 2003.
	And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

64. Mandatory Use Of Electronic Means Of Payment

Resolved,
	That provision may be made for requiring the use of electronic or other means for making payments under legislation relating to taxation matters.

65. Relief From Tax (Incidental And Consequential Charges)

Resolved,
	That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) that may arise from provisions designed in general to afford relief from taxation.

PROCEDURE (VAT ON ELECTRONIC SERVICES SUPPLIED IN ANY MEMBER STATE)

Resolved,
	That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may include provision for and in connection with giving effect to Article 26c of Council Directive 77/388/EEC as inserted by Council Directive 2002/ 38/EC.

PROCEDURE (DONATIONS TO CHARITY)

Resolved,
	That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain provision for the payment by the Commissioners of Inland Revenue of supplements on sums falling to be paid to charities and other bodies in accordance with schemes approved under section 202 of the Income and Corporation Taxes Act 1988.

PROCEDURE (EXCHANGE OF INFORMATION BETWEEN UNITED KINGDOM AND OTHER STATES OR TERRITORIES)

Resolved,
	That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may include provision about
	(a) the giving of information in relation to taxation matters, in pursuance of Community obligations, by the Commissioners of Inland Revenue or the Commissioners of Customs and Excise to tax authorities of other member States;
	(b) arrangements for the exchange of information relevant to the administration or enforcement of the tax laws of the United Kingdom and the territory to which the arrangements relate.

PROCEDURE (SAVINGS INCOME)

Resolved,
	That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain provision authorising the making of regulations for implementing and for dealing with matters arising out of or related to
	(a) any Community obligation created with a view to ensuring the effective taxation of savings income under the law of the United Kingdom and the laws of the other member States, or
	(b) any arrangements made with a territory other than a member State with a view to ensuring the effective taxation of savings income under the law of the United Kingdom and the law of the other territory.

PROCEDURE (FUTURE TAXATION)

Resolved,
	That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year
	(a) provision for corporation tax to be charged for the year 200405;
	(b) provision relating to the lower threshold in section 139(4) of the Income Tax (Earnings and Pensions) Act 2003;
	(c) provision about assets qualifying as business assets for the purposes of taper relief under Schedule A1 to the Taxation of Chargeable Gains Act 1992;
	(d) provision about gains treated as arising under Chapter 2 of Part 13 of the Income and Corporation Taxes Act 1988;
	(e) provision about the rate of landfill tax.

FINANCE [Money]

Queen's recommendation having been signified
	Resolved,
	That, for the purposes of any Act of the present Session relating to finance (the Act), it is expedient to authorise
	(a) the deduction from money or securities for money collected or received for or on account of value added tax of sums required by the department of the Commissioners of Customs and Excise for making payments pursuant to Article 9e of Council Regulation 218/92/EEC as inserted by Council Regulation 792/2002/EC;
	(b) the payment out of money provided by Parliament of such amounts as are required by the Commissioners of Inland Revenue to make payments under provisions of that Act relating to charities;
	(c) any increase, attributable to any provisions of the Act relating to Schedule 20 to the Finance Act 2000, in the sums deducted from the gross revenues of the department of the Commissioners of Inland Revenue for the purpose of the payment of RD tax credits;
	any increase, attributable to any provisions of the Act relating to Schedule 13 to the Finance Act 2002, in the sums deducted from the gross revenues of the department of the Commissioners of Inland Revenue for the purpose of the payment of tax credits under that Schedule.
	Bill ordered to be brought in upon the foregoing resolutions: And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Secretary Prescott, Mr. Secretary Blunkett, Mr. Secretary Milburn, Mr. Secretary Smith, Ms Secretary Hewitt, Mr. Secretary Clarke, Mr. Paul Boateng, Ruth Kelly, John Healey and Dawn Primarolo.

Finance Bill

Dawn Primarolo according presented a Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance: And the same was read the First time; and ordered to be read a Second time on Monday 28th April, and to be printed [Bill 94].

DELEGATED LEGISLATION

Mr. Deputy Speaker: I propose to put together the Questions on motions 3 and 4.
	Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Electricity

That the draft Electricity and Gas (Energy Efficiency Obligations) (Amendment) order 2003, which was laid before this House on 13th March, be approved.

Local Government Finance

That the Local Government Finance (England) Special Grant Report (No. 117) (HC537) on 2003-04 Special Grant for Driving Local Authority Planning Performance, which was laid before this House on 20th March, be approved.[Derek Twigg.]
	Question agreed to.

Regulatory Reform

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
	That the draft Regulatory Reform (Sugar Beet) Research and Education) Order 2003, which was laid before this House on 17th March be approved[Derek Twigg.]
	Question agreed to.

EUROPEAN COMMUNITY DOCUMENTS

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Security Of Energy Supply

That this House takes note of European Union Document No. 12228/02 Commission Communication, draft Directives and draft Council Decision relating to security of energy supply; and supports the Government's aim of securing practical and proportionate legislation which takes into account the Government's international obligations in the petroleum sector and contributes to the security of gas supplies within the context of a single energy market.[Derek Twigg.]
	Question agreed to.

Point of Order

Crispin Blunt: On a point of order, Mr. Deputy Speaker. You will be aware that today is the last sitting day before Mr. Laurence Kaye, who has served for 26 years in the Table Office and for more than 40 years in the service of the House, retires. Through you, Mr. Deputy Speaker, I wish to thank my constituent for all the service that he has given to all of us in the House. I thank also the Members of the House, over half of whom have signed early-day motion 954, thanking Mr. Kaye for his service and wishing him a happy retirement.

Mr. Deputy Speaker: Obviously, that is not a point of order for the Chair. However, the House has heard the hon. Gentleman's kind words and they are now a matter of record for the House.

PETITIONS
	  
	Pharmacies

Hugh Bayley: More than 5,000 of my constituents have signed a petition expressing concern that local pharmacies in York might be caused to close if the Government were to implement the recommendation of the Office of Fair Trading to allow pharmacies to open without approval from NHS authorities. The petition is signed by Susan Hargrave, a member of the Royal Pharmaceutical Society, and many others, and reads as follows:
	To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
	The Humble Petition of Residents of York sheweth that they wish to preserve local pharmacies and safeguard their continued services to local communities. Wherefore your Petitioners pray that your honourable House urges the Government to reject the proposals of the Office of Fair Trading that would allow unrestricted opening of pharmacies able to dispense NHS prescriptions.
	And your Petitioners, as in duty bound, will ever pray.
	To lie upon the Table.

Angela Browning: My petition, on behalf of my constituents, is also on the subject of pharmacies. I have a large rural constituency of about 600 square miles. The pharmacists have gathered signatures from the towns in and around Cullompton, Honiton, Crediton, Tiverton, Bampton and Ottery St. Mary.
	The Control of Entry Regulations which were introduced in 1987 would be revoked if the recommendations of the Office of Fair Trading report were to be accepted by the Government. My constituents send a petition to the House of Commons on behalf of pharmacists and their customers in the Tiverton and Honiton constituency.
	It declares that
	the Office of Fair Trading Report on pharmacies would threaten the future of their local services and urges the Government to reject the proposals that would allow unrestricted opening of pharmacies able to dispense NHS prescriptions, and to preserve local pharmacies and safeguard their continued services to local communities.
	And the Petitioners therefore request that the House of Commons takes whatever action it can to block the proposals.
	And the Petitioners remain, etc.
	To lie upon the Table.

James Gray: I, too, have the honour to present a petition on behalf of constituents who are extremely concerned about the effect of the Office of Fair Trading report on local pharmacies. The 1,778 people who have signed this petition all come from the town of Wootton Bassett or its surrounding area, and they are customers of C.M.L. Jones and Partner, the main pharmacist in the high street of Wootton Bassett. The petition states:
	The petition of Residents of Wootton Bassett, particularly of CML Jones and Partner, Pharmacists of Wootton Bassett, their customers and others
	Declares that the proposals made by the Office of Fair Trading allowing the unrestricted opening of pharmacies able to dispense NHS prescriptions will precipitate chaotic changes to the distribution of pharmaceutical services; lead to less convenient access for many patients, particularly the elderly and those without transport and have a detrimental impact on the contribution made to primary care services by community pharmacies.
	The petitioners therefore request that the House of Commons urge the Government to reject the proposals made by the OFT for the unrestricted opening of pharmacies.
	And the petitioners remain etc.
	To lie upon the Table.

Train Services (Thanet)

Stephen Ladyman: Important as community pharmacies are, you will be pleased to know, Mr. Deputy Speaker, that my petition is on a different subject. Today is the end of the Strategic Rail Authority's consultation on the use of channel tunnel rail link domestic services. It has been collected by Thanet Labour party people, who agree with me that a fast train service between Thanet and London is vital. It states:
	To the honourable Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled
	The humble petition of the undersigned citizens of Thanet Sheweth
	That the establishment of a fast train service between Thanet and London is essential for the economic regeneration of Thanet
	That the Thanet Towns to London via Canterbury route identified by the Strategic Rail Authority in its consultation paper on Channel Tunnel Domestic Services is the cheapest of the proposed options other than the 'core service' option and its additional cost would be easily recouped by savings generated by reducing unemployment in the District
	That such a service could begin at Margate calling at Broadstairs and Ramsgate, running at high speed after Ramsgate to Canterbury West, Ashford and London and thereby serve all the people of Thanet without the need to build new stations
	That a fast train service between Ramsgate and London could also be established cost effectively using existing rail routes as an alternative to using the Channel Tunnel Rail Link.
	Wherefore your petitioners pray that your honourable House shall urge the Secretary of State for Transport to ensure that a fast rail service between Thanet and London is established at the latest from the start of the new Kent franchise in 2007
	And your petitioners, as duty bound, will ever pray, etc.
	To lie upon the Table.

JOBCENTRE PLUS (HENDON)

Motion made, and Question proposed, That this House do now adjourn.[Mr. Ainger.]

Andrew Dismore: Thank you, Mr. Deputy Speaker, for calling me at such a late hour to start what I expect to be the last debate of this parliamentary term. I wish I had a fiver for every hon. Member who has mentioned to me, either with glee or commiseration, that I had the last debate tonight.
	I support the concept of Jobcentre Plus, which provides major improvements, combining benefits and job-seeking help from the same office. From what I have seen of the pathfinder offices that I visited during my work on the Select Committee on Work and Pensions, I have been impressed. Staff appreciate the better working conditions. Clients are treated like human beings in pleasant, business-like surroundings.
	My main concern is with implementation, both in general and in relation to my constituency. I am concerned that an office closure programme is being driven by the Treasury rather than for the benefit of the service. I understand from the Public and Commercial Services Union that a target of 1,000 jobcentre closures has become a given from the Treasury, and that for each round of the roll-out of Jobcentre Plus regional managers have been given the number of the offices to be closed as part of their job for the year. I am concerned about the lack of consultation and the breathtaking arrogance of management from the top down, as evidenced in letters that I have received from managers. They seem unable to apologise for errors in implementation that the Minister has apologised for. Nor do they seem to have the basic understanding that consultation means not just delaying a decision, but consulting openly to test, and if necessary to modify, their proposals. In my constituency, at least, that has resulted in a failure to give any proper explanations of the decisions taken.

Barry Gardiner: I am grateful to my hon. Friend for giving way, and for raising this very important topic, which is of concern to his constituents and mine. Does he agree that the lack of consultation has been of particular concern to local people, because it is in exactly that part of both of our constituencies where the need is greatest among the local population?

Andrew Dismore: I very much agree with my hon. Friend, and I shall deal with the question of consultation in some detail in a minute. He is of course referring to the closure of Burnt Oak jobcentre, which is onebut not the only oneof the closures about which I am concerned.
	In April 2002, Burnt Oak jobcentre was moved from the North London district, which serves my constituency, to the Brent, Harrow and Hillingdon district. The jobcentre stayed where it was, the boundary being down the middle of the Edgware road. This decision was taken by the chief executive of Jobcentre Plus. No reasons were given for the move, nor was there any consultation about the change in organisation. The jobcentre is on the other side of the road from my constituency, but so is Edgware jobcentre, which was allowed to remain in the North London district. That decision, organisational though it may have been, is the root cause of many of the problems that we have experienced. Clients primarily from my constituency, in the London borough of Barnet, are now being served by a jobcentre situated in the borough of Brenta factor that Jobcentre Plus conveniently overlooked in deciding to close Burnt Oak jobcentre.
	On 28 June and 17 September, I was asked to comment on a change in services to the Brent, Harrow and Hillingdon district. As I had not been told that my constituents had been moved out of my constituency for Jobcentre Plus purposes, I assumed that there was nothing to worry about. I knew that our roll-out of Jobcentre Plus was a long way off. The letter of 28 June said, in the context of my constituents not being affected, that the service was
	looking at options for alternative ways of delivering services
	for Barnet, Harrow and Hillingdon constituents. That comment was buried in the letter's small print.
	On 17 September, I was told that the intention was to
	replace existing services with more flexible services from alternative locations,
	which, again, referred to Brent, Harrow and Hillingdon. Nowhere in those letters were we told in plain English that the service for those from north London would be affected; nor did they make it clear that Burnt Oak jobcentre was to close in general terms, or for my constituents in particular. Moreover, at no stage was I told of the date of closure. I first learned that that date was 21 March on 20 March, in the columns of my local newspaper, which informed me that there had been full consultation and that no objections had been raised.
	In a letter from the chief executive of Jobcentre Plus dated April 2003no day was given, just the monthI was told of the list of people who had been consulted. The facts should have been checked before that letter was written. I have consulted my parliamentary neighbours, both of whose constituencies are served by Jobcentre Plus, and neither has any recollection of being consultedperhaps because of the rather elusive way in which the letters were worded. I was told that employers were consulted. Today, I spoke to the management of Brent Cross, the largest employer in my constituency, who did not even know that the jobcentre had closed until I told them.
	On Friday, I visited the Shaw trust, a very important voluntary sector organisation in my constituency. It is operating a workstep programme in conjunction with Jobcentre Plus, helping a dozen disabled peoplemost of whom are from west Hendon, in my constituencyat the former council nursery with programmes relating to the growing of plants. I visited it on Friday, and was told that it had an excellent relationship with Jobcentre Plus in Burnt Oak. It was I who pointed out that the jobcentre had been closed, which came as a complete surprise. The users were not directly consulted at all, and it would seem that the North London district, which serves my constituency, was probably not consulted either, to judge by my meeting with representatives on 8 April. I asked various questions about the decision to close Jobcentre Plus, and in true Fawlty Towers Manuel style, I was told, I know nothing. However, later in our discussions, they did admit that they knew some six months beforehand that it was to close.
	North London district has been asked to pick up the pieces. It does not know how many constituents were served by Jobcentre Plus. I have been given various figures, ranging from 255 to 1,775. I have been told that Mill Hill jobcentre a couple of miles away, which is supposed to pick up the trade from Burnt Oak, now has 20 per cent. more businessit is much busier, say the staffbut it never had the passing trade it now has, consisting of jobseekers. There are women returning to work, people changing jobs, students and jobseekers not receiving benefits. I was told that the best estimate so far is an extra 100 clients a week. Where have all the others gone? One can only assume that they are no longer availing themselves of the opportunity provided by Jobcentre Plus.
	There has been no handover of the good employers, as they were described to me by Jobcentre Plus. It is trying to contact them. There are 35 major employers, and Jobcentre Plus has no idea how many small and medium-sized employers were served by Burnt Oak jobcentre.
	We are told that various gimmicky alternatives will be offered, through libraries and so forthI was told as much in answer to my question to the Secretary of State for Work and Pensions todaybut I understand that none of those arrangements is in place yet. I am told of the wish to set up a jobshop at Brent Cross. That interests the Brent Cross management, who have heard nothing from Jobcentre Plus about the idea. Indeed, they have had no contact with Jobcentre Plus since before Christmas, when seasonal staff recruitment was being considered. There has clearly been no handover of the service to North London district.
	Now the same thing is about to happen with Hendon and Edgware jobcentres. I learned that from the trade union, which itself was told only on 4 April. It was given two weeks to commentuntil 18 April. I am told that I too am invited to comment, and my comment must be in by 1 May. That gives me two weeks as well, over the recess and the Easter holiday. My constituency contains a large Jewish community, and it will clearly not be possible to consult residents over Passover. I cannot believe that this is a serious attempt to consult anyone.
	I am told that that the changes will shrink Hendon jobcentre. It will serve only social fund clients. There will be a leaflet and general inquiry point, where national insurance numbers will be issued on behalf of Hendon and Edgware jobcentres. When I asked how customers from Edgware would be able to visit Hendon to get their national insurance numbers, I was told, The extra time is not a problem. The employers will pay the wages of the people who are having to spend all those hours coming to Hendon and hanging around, because the employers are keen for them to go on working. The cost is being transferred to the employers, with no consultation.
	Everything else will now be dealt with from Edgware. I am told by the chief executive that there are good bus links, but she has clearly not tried them, and nor have any of the other Jobcentre Plus managers whom I asked. There is no direct bus route from Hendon to Edgware: at least one change is involved.
	I am told that at Edgware there will be a reception service for quick advice; otherwise, the service will be by appointment only. I am also told that from September 2003 there will be a new client management system so that people can make their claims by telephone, but they will still need an appointment to go and fill in the forms. PCS has several worries. It is concerned about the risk of an incident if a client is not seen on the same day. It fears that the appointments system may overrun, causing staff either to have to work late against their wishes or to be sent away. It says that there is no easy way of separating simple and complex cases. Those concerns can very possibly be overcome, but why introduce such changes now rather than when the alternatives are up and running? Clearly no arrangement has been made for proper timing of the changes.
	I am told that outreach services are to replace Burnt Oak, but none has been organised yet. I am told that there will be a new call centre for client management, which will probably not be sited in north Londonthat is typical of the way in which the department is being reorganisedbut not until September 2003. The proper replacement for Jobcentre Plus, following the full roll-out, will not be there until 2005-06. Then, hopefully, we shall have a new office to combine the old Hendon office and the Hendon jobcentre in a new office in central Hendon. However, although the local authority and estate agents are involved, so far it has not been possible to find any premises. I very much approve of the idea of setting up an office in central Hendon, but I object to everywhere else being closed down unless and until the alternative location is found.
	I support the concept of Jobcentre Plus, and I acceptas does the unionthe need for reorganisation, but it has to be done properly, with meaningful consultation in which the views of users are taken into account. Users have been woefully ignored in the process so far. It must take into account people who represent organisations in the constituency and employers, who have been ignored throughout. Most importantly, the proper alternatives must be in place before change is implemented, and it must be done not to please the Treasury but to ensure that services are improved and not reduced.

Malcolm Wicks: I congratulate my hon. Friend the Member for Hendon (Mr. Dismore) on securing this debate on an important subject for his constituency. I have listened carefully to the points he and my hon. Friend the Member for Brent, North (Mr. Gardiner) made. I understand the concern of my hon. Friend the Member for Hendon to ensure that Jobcentre Plus provides a quality service to his constituents, and I am sure that we are all equally concerned that that should apply throughout the country. As a fellow London MP, I am also aware of some of the more particular circumstances that need to be taken into consideration when making changes to service delivery in the capital.
	Jobcentre Plus is delivering a radical change in the way in which benefits and employment services are provided to people of working age, and I welcome my hon. Friend's support for that radical change. By 2006, we plan to roll out a network of 1,000 fully integrated Jobcentre Plus offices. Through the development of those new, modern offices, Jobcentre Plus will provide an integrated, work-focused service to all people of working age. The introduction of work-focused interviews extends the opportunity to more people to take advantage of the help, guidance and support that we can provide to help them move into work. The new services we are also introducing for employers are helping them to fill job vacancies quickly and effectively with well prepared and motivated employees.
	The new Jobcentre Plus services are customer focused. The new offices enable customers to make inquiries about both their benefits and employment opportunities in the same place. Our new telephone contact centres mean that customers can make inquiries about both benefits and jobs without even having to come into one of our offices. The introduction of new technology is also enabling people to find the information they need about jobs and training via the internet and our new jobpoints. Jobpoints are not just being placed in Jobcentre Plus offices, but in other public places such as libraries, supermarkets and even, in one case, a local pub. All those developments are making it easier for our customers to take advantage of the services we provide.
	That customer focus is also built into the process that Jobcentre Plus uses when converting our current network of offices to the new integrated service. During the national planning for the implementation of Jobcentre Plus, customer representatives and trade unions were consulted. My right hon. Friend the Minister for Work has also written to MPs to ensure that they are aware of the roll-out programme.
	So far, 230 of the new-style offices have been successfully opened, but the change cannot be delivered nationally overnight. We have set out our plans to convert all parts of the country to the new integrated service by 2006. However, we will not open an office unless we are confident that it provides an environment in which the new Jobcentre Plus process will work and that is safe for our staff and customers. Throughout the transitional period, our old social security offices and jobcentres will work together to ensure that customers will still benefit from the excellent service we aim to offer. At the Jobcentre Plus district level, managers consult the widest possible range of people about the service they are planning to provide. Local advice and welfare groups, local authorities and MPs are essential sources of guidance in that matter.
	My hon. Friend's constituents in Hendon are served by two Jobcentre Plus districtsBrent, Harrow and Hillingdon district and the North London district. The Brent, Harrow and Hillingdon district converted to the new integrated offices during 200203. The district began planning for the roll-out in March 2002 and wrote in June to nearly 200 local stakeholders for their opinions on the proposed roll-out of the new service. I am assured that that included, among others, local employers, social services, local MPs and local organisations such as citizens advice bureaux and Mind.
	In September 2002, the district wrote again to those stakeholders advising them of the decisions made for the roll-out. The plans for the new integrated service included the closure of Burnt Oak Jobcentre, which was used by some of my hon. Friend's constituentshence this Adjournment debate. I am told that Burnt Oak previously provided employment advice to about 60 callers each week. Local people actually claimed their benefits and accessed the full range of employment services through one of the other local jobcentres or social security offices.
	The letter issued by Brent, Harrow and Hillingdon district notifying the local community, including MPs, of roll-out plans included information about the change in services at Burnt Oak. However, I agree with my hon. Friend that the fact that the office was closing could have been explained more clearly. New guidance has recently been issued to all district managers to ensure that roll-out plans are explained more clearly and explicitly in future.
	I emphasise that customers who previously used Burnt Oak Jobcentre have not been abandoned and will have access to a range of alternative services. They will have access to a full range of jobsearch facilities at Mill Hill jobcentre as well as having access to the contact centre in Harrow and our internet facilities. We also intend to install a jobpoint in Burnt Oak library to help customers to search for jobs. In addition, Jobcentre Plus staff will hold regular surgeries at the local careers service.
	The majority of Hendon is served by the North London Jobcentre Plus district, containing both jobcentres and social security offices. Most benefit claims are processed at the Edgware social security office. We plan to replace those offices with new integrated Jobcentre Plus offices in 200506. Until that time, Jobcentre Plus will continue to provide the same high level of service we expect through its current network.
	I hear what my hon. Friend says about wishing that expenditure was no constraint and that a Jobcentre Plus office could be available in every community centre. He will, however, have visited a Jobcentre Plus office and will therefore know that they are, quite properly, expensive facilities. We assume that 1,000 offices can be afforded throughout Great Britain if we are to maintain quality.
	The people of Hendon are being well served by Jobcentre Plus. Since 1997, unemployment has fallen by nearly a third, and long-term unemployment has fallen by more than two thirds. The new deals have also helped more than 1,300 people to move into work in my hon. Friend's constituency. We are building on the services that we offer through the introduction of the Progress2Work programme this year. That will provide more intensive support to help recovering drug misusers to move into work.
	Nationally, the introduction of Jobcentre Plus is being well received by customers. In surveys we have found that eight out of 10 customers are satisfied with all elements of the new service. Jobcentre Plus performance is also improving as a result of the roll-out. The integrated offices are exceeding their share of national performance and are exceeding their job entry targets by more than 10 per cent.
	Jobcentre Plus looks after more than 1,500 offices, handling more than 10,000 job vacancies and helping more than 100,000 callers every working day. Jobcentre Plus is a very large organisation providing a vital service to people of working age across the country. However, we must not forget that the service we provide is focused on helping individuals. It is employment policy with a human face, providing them with the support that they need to improve their lives. As we roll out our improved Jobcentre Plus service, we will maintain customer focus to ensure that we provide all our customers with the opportunity to benefit from our services.
	I wish you, Mr. Deputy Speaker, other hon. Members in the House and officials a happy Easter.
	Question put and agreed to.
	Adjourned accordingly at nine minutes past Twelve o'clock.